Powdered sugar is not a suitable substitute for granulated sugar in baking recipes. Powdered sugar is granulated sugar that has been processed into powdered form. Cornstarch is then added to prevent clumping during use. The consistency of powdered sugar makes it suitable for icings, meringue, and pastry creams.
The size of a sugar granule determines how well air incorporates into baking batters and how well it browns in the oven. The larger the sugar granule, the more air incorporated into the batter. Since cake batters need the incorporation of air to help with rising, powdered sugar does not provide the same results as granulated sugar. Larger granules also help baked goods brown because the sugar caramelizes during the baking process. Powdered sugar dissolves quickly, which does not allow baked goods to brown in the oven.