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<p>This paper examines how corruption acts as a structural barrier to the development of the green bond market, using panel data from 74 countries between 2013 and 2023. Green bonds are evolving as a critical instrument for financing sustainable projects, but their adoption remains uneven across countries. We show that Corruption appears to have a pronounced effect on green bond issuance in middle-income (developing) countries, whereas it has little to no effect in high-income (developed) countries. Furthermore, our results show that institutional quality significantly influences this association. Corruption's negative effects are more noticeable in economies with poorer political stability, less effective governments, and a weaker regulatory framework. This suggests that institutional fragility heightens investor concern&#xa0;and jeopardizes sustainable funding initiatives. Additionally, our results remain strong and significant when we employ instrumental-variable (2SLS) and propensity-score matching (PSM) methods to control for potential endogeneity and capture the correlational pattern. These findings confirm that, even after controlling for potential endogeneity and sample selection bias, there is a significant negative association between corruption and the issuance of green bonds that persists.</p>

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Does corruption hinder the growth of the green bond market? Empirical evidence from developed and developing economies

  • 期刊论文

  • 发表日期：

    2026年7月22日

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  • Pragya Upadhyay,
  • Shashank Bansal

摘要

This paper examines how corruption acts as a structural barrier to the development of the green bond market, using panel data from 74 countries between 2013 and 2023. Green bonds are evolving as a critical instrument for financing sustainable projects, but their adoption remains uneven across countries. We show that Corruption appears to have a pronounced effect on green bond issuance in middle-income (developing) countries, whereas it has little to no effect in high-income (developed) countries. Furthermore, our results show that institutional quality significantly influences this association. Corruption's negative effects are more noticeable in economies with poorer political stability, less effective governments, and a weaker regulatory framework. This suggests that institutional fragility heightens investor concern and jeopardizes sustainable funding initiatives. Additionally, our results remain strong and significant when we employ instrumental-variable (2SLS) and propensity-score matching (PSM) methods to control for potential endogeneity and capture the correlational pattern. These findings confirm that, even after controlling for potential endogeneity and sample selection bias, there is a significant negative association between corruption and the issuance of green bonds that persists.