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Antecedents of Regional Financial Independence: A Moderating Effect of Capital Expenditure at Local Government Level in Indonesia

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  • Fathan Qoriiba
  • Khoirul Aswar
  • Ermawati

Abstract

This study aims to examine regional tax, general allocation fund, special allocation fund, and capital expenditure as a mediating on regional financial independence. Regency/City in West Java Province was used as a sample in this study. The purposive sampling method was used in this study to select a sample of 27 districts/cities in West Java Province from 2016 to 2019. Hypotheses in this study were tested using Structural Equation Model using Smart PLS 3.0 software. This study results in Regional Tax, General Allocation Fund, and Special Allocation Fund have a significant effect on regional financial independence, while capital expenditure is not able to mediate the effect of regional tax, general allocation fund, and special allocation fund on regional financial independence. For Local Governments, it is expected to optimize local taxes through the improvement of adequate public services. Then, given that the composition of general allocation funds and special allocation funds is quite dominant, the funds should be optimized for the development sectors so that their use can be efficient which will encourage economic growth and indirectly increase regional financial independence.

Suggested Citation

  • Fathan Qoriiba & Khoirul Aswar & Ermawati, 2021. "Antecedents of Regional Financial Independence: A Moderating Effect of Capital Expenditure at Local Government Level in Indonesia," Journal of Economics and Behavioral Studies, AMH International, vol. 13(4), pages 41-49.
    • Handle: RePEc:rnd:arjebs:v:13:y:2021:i:4:p:41-49
    DOI: 10.22610/jebs.v13i4(J).3199
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    References listed on IDEAS

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    1. Suratno & J.M.V. Mulyadi, 2020. "Taxes, Revenues and Capital Expenditure as Determinants of Financial Sufficiency of Regional Government," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 283-290.
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    3. Kesit Bambang Prakosa, 2004. "Analisis Pengaruh Dana Alokasi Umum (DAU) dan Pendapatan Asli Daerah (PAD) terhadap Prediksi Belanja Daerah (Studi Empirik di Wilayah Propinsi Jawa Tengah Dan DIY)," Jurnal Akuntansi dan Auditing Indonesia, Accounting Department, Faculty of Business and Economics, Universitas Islam Indonesia, vol. 8(2).
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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