Open AccessFinancial Performance of Local Government and Social Welfare: The Case in Indonesia
Author(s) -
Khairudin Khairudin,
Rosmiati Tarmizi,
Indrayenti Indrayenti,
Aminah Aminah,
Kamaruzzaman Muhammad
Publication year - 2019
Publication title -
the journal of social sciences research
Language(s) - English
Resource type - Journals
eISSN - 2413-6670
pISSN - 2411-9458
DOI - 10.32861/jssr.spi1.168.172
Subject(s) - financial independence , welfare , local government , indonesian , finance , local community , economics , business , financial analysis , independence (probability theory) , public economics , indonesian government , financial ratio , financial market efficiency , financial system , market economy , political science , public administration , linguistics , philosophy , statistics , mathematics , law
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.