Revealing the nexus: financial development and environmental sustainability as remedies for corruption – A global perspective

Abstract

PurposeThe purpose of the present study is to test the effect of financial development and environmental degradation on the control of corruption.Design/methodology/approachThis study used a dynamic approach known as system GMM to analyze annual data from 90 developed and developing countries over 24 years, from 1996 to 2020.FindingsThe present study shows a significantly negative relationship between financial development and control of corruption and a significantly positive relationship between environmental degradation and control of corruption. The result suggests that improvement in financial development may reduce control of corruption; however, reduction in environmental degradation may reduce control of corruption. The results are consistent across both developed and developing countries.Practical implicationsThe study’s findings have significant implications for financial institutions, governmental policy departments and environmental regulatory agencies. The policy outcomes are closely linked to the economic prosperity of countries. In general, developing countries can implement strategies to promote financial development and environmental regulations, even though they may temporarily tolerate corrupt activities. Conversely, developed nations may have differing implications from developing countries.Originality/valueThis study is different from the past literature as none of the studies have been conducted previously focusing on developed and developing countries’ financial development, environmental degradation and control of corruption.