The Role of Financial and Non-financial Performance of Local Governments in Enhancing Regional Autonomy in Indonesia

Abstract

Regional autonomy is a crucial factor that can support the financial sustainability of local governments. This research aims to assess how financial and non-financial performance influence regional autonomy in Indonesia. Through purposive sampling, data were gathered from Indonesian Local Governments between 2016 and 2018, resulting in a sample size of 1555 observations. Multiple linear regression was used for Hypothesis testing. The findings of this research suggest that both the financial and non-financial performance of local governments play a positive role in enhancing regional autonomy. Local governments that have high-quality financial reporting and good governance performance tend to have a higher level of regional autonomy, compared to those with poor-quality financial reports and governance performance. This is inherently connected to the effectiveness in managing local own source revenue (PAD) and is reinforced by strong public confidence and engagement in tax payment and regional retributions, as well as other PAD sources. The findings of this study have implications for the importance of improving the quality of financial management and the administration of local government functions to increase regional autonomy and simultaneously realize the financial sustainability of local governments. Therefore, local governments should manage resources efficiently, transparently, and accountably. Keywords: performance, financial management, implementation of regional government functions, regional autonomy