Template-Type: ReDIF-Paper 1.0
Author-Name: Giulio Cornelli
Author-X-Name-First: Giulio 
Author-X-Name-Last: Cornelli
Author-Name:  Sebastian Doerr
Author-X-Name-First: Sebastian 
Author-X-Name-Last: Doerr
Author-Name: Leonardo Gambacorta
Author-X-Name-First: Leonardo 
Author-X-Name-Last: Gambacorta
Author-Name: Ouarda Merrouche
Author-X-Name-First: Ouarda 
Author-X-Name-Last: Merrouche
Title: Inside the regulatory sandbox: effects on fintech funding
Abstract: Policymakers around the world are adopting regulatory sandboxes as a tool for spurring innovation in the financial sector while keeping alert to emerging risks. Using unique data for the UK, this paper provides initial evidence on the effectiveness of the world's first sandbox in improving fintechs' access to finance. Firms entering the sandbox see a significant increase of 15% in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%. Our results furthermore suggest that the sandbox facilitates access to capital through two channels: reduced asymmetric information and reduced regulatory costs or uncertainty. Our results are confirmed when we exploit the staggered introduction of the sandbox and compare firms in earlier to those in later sandbox cohorts, and when we compare participating firms to a matched set of firms that never enters the sandbox.
Length: 42 pages
Creation-Date: 2020-11
File-URL: https://www.bis.org/publ/work901.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work901.htm
File-Format: text/html
Number: 901
Keywords: fintech, regulatory sandbox, startups, venture capital.
Classification-JEL: G32, G38, M13, O3
Handle: RePEc:bis:biswps:901