SUSTAINABILITY GOVERNANCE, REGULATORY QUALITY, AND ANTI-CORRUPTION CONTROLS ON GREEN FINANCE DEVELOPMENT: THE MEDIATING ROLE OF SUSTAINABILITY REPORTING QUALITY

Abstract

Purpose: This research aims to study whether and how governance structures of national sustainability, proxies using governance effectiveness, regulatory quality, and corruption control, can be converted into strong green finance development, and the study would seek to find out whether this relationship is mediated by a control channel through sustainability reporting quality. Design/Methodology/Approach: A 30-country balanced panel dataset 2015-2024 is compiled out of the World Bank Worldwide Governance Indicators (WGI), Global Reporting Initiative (GRI) database, International Finance Corporation (IFC) green finance tracker, MSCI ESG Research, and KPMG Survey of Sustainability Reporting based on the theory of the Institutional Theory and Signaling Theory. The main estimator is Disequilibrium (Driscoll-Kraay) standard errors with country- and year-fixed effects, and mediation is formally tested by the Sobel-Goodman process with bootstrapped confidence intervals of size 5,000 replications.

Findings: Government effectiveness and regulatory quality are both positive and significant predictors of the development of green finance. The impact of corruption control on the green finances outcomes is a non-linear threshold-conditioned impact. The quality of sustainability reporting is a complete mediator of the governance-green finance nexus, which validates that the institutional reforms should be supported by plausible disclosure infrastructure to initiate the capital market reactions. The mediation effect is stronger in the common-law and high-income economies.

Research Limitations/Implications: The endogenous aspect of reporting requirements and cross-country comparability of composite governance indexes are major limitations. Practical implications-- The introduction of the sustainability reporting requirement in the national governance agenda should be central to new economies aiming to attract green capital.

Originality/value: The work belongs to the first category of research studies to formally define the quality of sustainability reporting as the transmission mechanism by which governance improvements produce green finance development as a part of the governance-disclosure-finance nexus literature.