Determinants of Provincial Government Financial Performance in Indonesia

Abstract

This study aims to determine the effect of local government size, capital expenditure, e-government, and follow-up on recommendations from the Supreme Audit Agency’s (BPK) audit findings concerning the fiscal performance of provincial administrations across Indonesia. This investigation adopts a quantitative methodology utilizing secondary records in the form of Audit Reports on Local Government Financial Statements (LHP LKPD) and the BPK’s Semiannual Audit Summary (IHPS), obtained from the official website of the Supreme Audit Agency of the Republic of Indonesia (BPK RI), as well as the Evaluation Report on the Electronic-Based Government System (SPBE), sourced from the official web portal of the Ministry of Administrative and Bureaucratic Reform (KemenPAN-RB). The research demographic comprises of 38 provincial governments in Indonesia. This paper employed a purposive sampling method with a population of 34 provincial governments in Indonesia during the 2020–2024 period, resulting in 170 observations. Data analysis was conducted using panel data regression with EViews 13. The results indicate that the local government size and e-government have a positive and significant effect on financial performance of provincial governments in Indonesia. Meanwhile, capital expenditure and the follow-up on Supreme Audit Agency (BPK) audit recommendations do not affect on the financial performance of provincial governments in Indonesia. Simultaneously, the variables of local government size, capital expenditure, e-government, and the follow-up on BPK audit Recommendations influence the financial performance of provincial governments in Indonesia.