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Financial Performance of Local Government and Social Welfare: The Case in Indonesia

Author

Listed:
  • Khairudin

    (Department of Economics Universitas Bandar Lampung, Indonesia)

  • Rosmiati Tarmizi

    (Department of Economics Universitas Bandar Lampung, Indonesia)

  • Indrayenti

    (Department of Economics Universitas Bandar Lampung, Indonesia)

  • Aminah

    (Department of Economics Universitas Bandar Lampung, Indonesia)

  • Kamaruzzaman Muhammad*

    (Faculty of Accountancy Universiti Teknologi MARA, Malaysia)

Abstract

This study aims to examine the relationship between financial performance and community welfare among the Indonesian local governments. Using content analysis, this study measures the financial performance by utilizing financial ratios such as financial independence, financial effectiveness, financial efficiency, and financial growth whilst community welfare is measured through the Human Development Index (HDI). Based on 146 Indonesian local governments, this study shows that the financial performance and the community welfare in Indonesian local governments are not favorable. This study also shows that financial independence, financial effectiveness and financial efficiency of the local governments are positive significantly affect community welfare. However, financial growth of the local governments has a negative and significant effect on community welfare. This study confirms the stakeholder theory, in which the local governments provide benefits to the stakeholders in the form of community welfare although such benefits has yet to reach the community’s expectations.

Suggested Citation

  • Khairudin & Rosmiati Tarmizi & Indrayenti & Aminah & Kamaruzzaman Muhammad*, 2018. "Financial Performance of Local Government and Social Welfare: The Case in Indonesia," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 1035-1039:5.
    • Handle: RePEc:arp:tjssrr:2018:p:1035-1039
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    References listed on IDEAS

    as
    1. Asatryan, Zareh & De Witte, Kristof, 2015. "Direct democracy and local government efficiency," European Journal of Political Economy, Elsevier, vol. 39(C), pages 58-66.
    2. Iskandar, Azwar & Subekan, Achmat, 2014. "Kinerja Keuangan Daerah Dan Kesejahteraan Rakyat Di Era Desentralisasi Fiskal (Studi Empiris Pada Kabupaten/Kota Provinsi Sulawesi Selatan Ta 2008-2012) [Local Financial Performance And The Social ," MPRA Paper 77677, University Library of Munich, Germany.
    3. Erlane K. Ghani & Jauharoh Jamal & Evita Puspitasari & Ardi Gunardi, 2018. "Factors influencing integrated reporting practices among Malaysian public listed real property companies: a sustainable development effort," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 10(2), pages 144-162.
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