<p>This study examines whether financial development promotes circular economy performance and whether this effect depends on institutional quality. Using a balanced panel of 109 countries, including 30 developed economies and 79 developing economies, over the period 2002–2024, the study constructs a macro-level circular economy index from four dimensions: carbon efficiency, energy efficiency, energy transition, and material pressure. The results show that financial development matters for the circular economy, but its effect is conditional rather than automatic. Developed economies record much higher circular economy performance, deeper financial systems, and stronger average institutional quality than developing economies. In developed economies, the direct effect of financial development becomes weaker once the average institutional quality index is introduced, while institutional quality itself remains a strong positive factor supporting circular economy performance. In developing economies, by contrast, financial development has a stronger direct effect, and its interaction with the average institutional quality index is clearly positive. This indicates that finance contributes more effectively to circular transition when governance is stronger. The study concludes that the finance–circular economy nexus is development-specific and institution-dependent. The findings imply that expanding finance alone is insufficient. Developed economies need stronger governance of mature financial systems, while developing economies need both greater financial access and better institutional quality to channel capital toward circular activities.</p>