Determinants of Local Government Financial Sustainability: The Mediating Role of Reserve Funds
DOI:
https://doi.org/10.35877/454RI.qems4079Keywords:
Financial Sustainability, Dependence, Expenditure, Investment, Reserve FundsAbstract
This study examines the influence of regional dependence, capital expenditure productivity, and regional investment intensity on regional financial sustainability, with the establishment of reserve funds as a moderating variable. Using panel data from the provinces of Aceh and Papua from 2016 to 2022, the research applies quantitative methods through multiple regression analysis and Moderated Regression Analysis (MRA). The findings reveal that high regional dependence negatively affects financial sustainability, while productive capital expenditure and strong investment intensity contribute positively. Moreover, the presence of reserve funds significantly moderates these relationships strengthening positive effects and weakening negative impacts. These results highlight the importance of balanced financial autonomy and strategic fiscal management in achieving sustainable regional development. The implications suggest that local governments should prioritize increasing financial independence, optimize capital expenditures, and develop reserve funds to enhance fiscal resilience
References
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Gali?ski, P. (2023). DETERMINANTS OF THE EXPENDITURE SIDE OF ENVIRONMENTAL FEDERALISM – PANEL DATA RESEARCH ON COUNTRIES IN EUROPE. Economics and Environment, 86(3). https://doi.org/10.34659/eis.2023.86.3.601
Gao, S. (2024). An Exogenous Risk in Fiscal-Financial Sustainability: Dynamic Stochastic General Equilibrium Analysis of Climate Physical Risk and Adaptation Cost. Journal of Risk and Financial Management, 17(6), 244. https://doi.org/10.3390/jrfm17060244
Gleißner, W., Günther, T., & Walkshäusl, C. (2022). Financial sustainability: measurement and empirical evidence. Journal of Business Economics, 92(3). https://doi.org/10.1007/s11573-022-01081-0
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Lhutfi, I., & Sugiharti, H. (2023). Financial Sustainability of Local Governments in Indonesia. Jurnal ASET (Akuntansi Riset), 14(1), 159–170. https://doi.org/10.17509/jaset.v14i1.48133
Maizunati, N. A. (2017). Analisis Kondisi Keuangan Pemerintah Daerah Kota Magelang Dalam Klaster Kota Di Jawa-Bali. Jurnal Riset Akutansi Keuangan, 2(2).
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Nzau, F. K., & Kimunguyi, S. (2018). FACTORS INFLUENCING FINANCIAL SUSTAINABILITY IN REGIONAL INTERGOVERNMENTAL ORGANIZATIONS (IGOS) IN AFRICA. Strategic Journal of Business & Change Management, 5(4). https://doi.org/10.61426/sjbcm.v5i4.972
Paudel, R. C. (2023). Capital expenditure and economic growth: A disaggregated analysis for Nepal. Cogent Economics and Finance, 11(1). https://doi.org/10.1080/23322039.2023.2191449
Primadiva, P. P., Rosdini, D., & Mulyani, S. (2021). Pengaruh tingkat kekayaan dan tingkat ketergantungan daerah terhadap kinerja pemerintah daerah. Jurnal Paradigma Ekonomika, 16(2). https://doi.org/10.22437/jpe.v16i2.11999
Ríos, A., Guillamón, M., Cifuentes?Faura, J., & Benito, B. (2022). Efficiency and sustainability in municipal social policies. Social Policy & Administration, 56(7), 1103–1118. https://doi.org/10.1111/spol.12843
Rodríguez Bolívar, M. P., López Subires, M. D., Alcaide Muñoz, L., & Navarro Galera, A. (2021a). The financial sustainability of local authorities in England and Spain: a comparative empirical study. International Review of Administrative Sciences, 87(1), 97–114. https://doi.org/10.1177/0020852319834721
Rodríguez Bolívar, M. P., López Subires, M. D., Alcaide Muñoz, L., & Navarro Galera, A. (2021b). The financial sustainability of local authorities in England and Spain: a comparative empirical study. International Review of Administrative Sciences, 87(1), 97–114. https://doi.org/10.1177/0020852319834721
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Suryaningsih, N. M., & Sisdyani, E. A. (2016). Karakteristik Pemerintah Daerah dan Opini Audit Pada Kinerja Keuangan Pemerintah Daerah. E-Jurnal Akuntansi Universitas Udayana, 15(2), 1453–1481.
Trussel, J. M., & Patrick, P. A. (2009). A predictive model of fiscal distress in local governments. Journal of Public Budgeting, Accounting & Financial Management, 21(4). https://doi.org/10.1108/jpbafm-21-04-2009-b004
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Wang, C. (2023). Local Government Financing in China: Fiscal Fatigue and Debt Sustainability. https://doi.org/10.1007/978-981-99-6441-3_13
Wardhani, D. T., & Payamta, P. (2020). Menguji Faktor Determinan Financial Sustainability pada Sektor Pemerintah. Jurnal Kajian Akuntansi, 4(1), 13. https://doi.org/10.33603/jka.v4i1.3305
Winarni, E., Ahmad, A. A., & Suharno, S. (2020). Pengaruh Investasi dan Belanja Modal terhadap Pertumbuhan Ekonomi di Provinsi Jawa Tengah. Jurnal Ilmiah Universitas Batanghari Jambi, 20(2), 447. https://doi.org/10.33087/jiubj.v20i2.946
Zamzami, F., & Rakhman, F. (2023). Determinants of Local Government Financial Performance in Indonesia. Academic Journal of Interdisciplinary Studies, 12(5), 332–347. https://doi.org/10.36941/ajis-2023-0148
Zulvan, M. F., & Purbasari, H. (2024). Pengaruh Investasi, Belanja Modal, dan Pendapatan Asli Daerah Pemerintah Daerah Terhadap Pertumbuhan Ekonomi. Jurnal EMT KITA, 8(1), 175–186. https://doi.org/10.35870/emt.v8i1.2095
Andrews, R. (2015). Vertical consolidation and financial sustainability: evidence from English local government. Environment and Planning C: Government and Policy, 33(6), 1518–1545. https://doi.org/10.1177/0263774X15614179
Aulia, R., & Rahmawaty, R. (2020). PENGARUH KEMAKMURAN PEMERINTAH DAERAH, UKURAN PEMERINTAH DAERAH, DAN TINGKAT KETERGANTUNGAN PEMERINTAH DAERAH TERHADAP KINERJA KEUANGAN PEMERINTAH KABUPATEN/KOTA DI PROVINSI ACEH. Jurnal Ilmiah Mahasiswa Ekonomi Akuntansi, 5(4). https://doi.org/10.24815/jimeka.v5i4.16826
Bi, H. (2017). Fiscal Sustainability: A Cross-Country Analysis. The Federal Reserve Bank of Kansas City Economic Review. https://doi.org/10.18651/ER/4q17Bi
Bolívar, M. P. R., Subires, M. D. L., Muñoz, L. A., & Galera, A. N. (2021). The Financial Sustainability of Local Authorities in England And Spain: A Comparative Empirical Study. International Review of Administrative Sciences, 87(1), 97–114. https://doi.org/10.1177/0020852319834721
Christia, A. M., & Ispriyarso, B. (2019). DESENTRALISASI FISKAL DAN OTONOMI DAERAH DI INDONESIA. Law Reform: Jurnal Pembaharuan Hukum, 15(1). https://doi.org/10.14710/lr.v15i1.23360
Chumba, J. A., Muturi, W., & Oluoch, J. (2019). EFFECT OF FINANCIAL INVESTMENT STRATEGIES ON THE FINANCIAL SUSTAINABILITY OF UNIVERSITIES IN KENYA. International Academic Journal of Economics and Finance, 3(3), 37–49.
Cuadrado-Ballesteros, B., & Bisogno, M. (2022). Budget transparency and financial sustainability. Journal of Public Budgeting, Accounting and Financial Management, 34(6). https://doi.org/10.1108/JPBAFM-02-2022-0025
Dadi?, L., & Ribari?, H. M. (2021). Improving the financial sustainability of nonprofit organizations through tourism-related activities. Journal of Philanthropy and Marketing, 26(2). https://doi.org/10.1002/nvsm.1692
Darwanis, D., & Saputra, R. (2014). Pengaruh Belanja Modal terhadap Pendapatan Asli Daerah dan Dampaknya Pada Kinerja Keuangan Pemerintah Daerah (Studi Empiris Pada Pemerintah Daerah Kabupaten/Kota Di Provinsi Aceh). Jurnal Dinamika Akuntansi Dan Bisnis, 1(2), 183–199. https://doi.org/10.24815/jdab.v1i2.3628
Drew, J., & Dollery, B. (2016). A Factor Analytic Assessment of Financial Sustainability: The Case of New South Wales Local Government. Australian Accounting Review, 26(2). https://doi.org/10.1111/auar.12092
Ferreira, F. H. G. (1995). ROADS TO EQUALITY Wealth Distribution Dynamics with Public-Private Capital Complimentarity. London School of Economics and Political Science.
Gali?ski, P. (2023). DETERMINANTS OF THE EXPENDITURE SIDE OF ENVIRONMENTAL FEDERALISM – PANEL DATA RESEARCH ON COUNTRIES IN EUROPE. Economics and Environment, 86(3). https://doi.org/10.34659/eis.2023.86.3.601
Gao, S. (2024). An Exogenous Risk in Fiscal-Financial Sustainability: Dynamic Stochastic General Equilibrium Analysis of Climate Physical Risk and Adaptation Cost. Journal of Risk and Financial Management, 17(6), 244. https://doi.org/10.3390/jrfm17060244
Gleißner, W., Günther, T., & Walkshäusl, C. (2022). Financial sustainability: measurement and empirical evidence. Journal of Business Economics, 92(3). https://doi.org/10.1007/s11573-022-01081-0
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). An Introduction to Structural Equation Modeling. https://doi.org/10.1007/978-3-030-80519-7_1
Handayani, D., & Surachman, E. N. (2023). Peningkatan Kapasitas Analisis Laporan Keuangan Diplomat Indonesia Dalam Rangka Mendukung Diplomasi Ekonomi di Bidang Investasi. Pengmasku, 3(2), 80–88. https://doi.org/10.54957/pengmasku.v3i2.610
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Kriz, K. A. (2015). Is there an optimal size of fiscal reserves for local governments? In Local Government Budget Stabilization: Explorations and Evidence. https://doi.org/10.1007/978-3-319-15186-1_9
Lhutfi, I., & Sugiharti, H. (2023). Financial Sustainability of Local Governments in Indonesia. Jurnal ASET (Akuntansi Riset), 14(1), 159–170. https://doi.org/10.17509/jaset.v14i1.48133
Maizunati, N. A. (2017). Analisis Kondisi Keuangan Pemerintah Daerah Kota Magelang Dalam Klaster Kota Di Jawa-Bali. Jurnal Riset Akutansi Keuangan, 2(2).
Muhtar, Arifin, T., & Sutaryo. (2021). Performance Accountability in Indonesian Local Governments: Does Monitoring Really Work? International Journal of Business and Society, 22(3), 1673–1692. https://doi.org/10.33736/ijbs.4329.2021
Navarro-Galera, A., Rodríguez-Bolívar, M. P., Alcaide-Muñoz, L., & López-Subires, M. D. (2016). Measuring the financial sustainability and its influential factors in local governments. Applied Economics, 48(41), 3961–3975. https://doi.org/10.1080/00036846.2016.1148260
Nzau, F. K., & Kimunguyi, S. (2018). FACTORS INFLUENCING FINANCIAL SUSTAINABILITY IN REGIONAL INTERGOVERNMENTAL ORGANIZATIONS (IGOS) IN AFRICA. Strategic Journal of Business & Change Management, 5(4). https://doi.org/10.61426/sjbcm.v5i4.972
Paudel, R. C. (2023). Capital expenditure and economic growth: A disaggregated analysis for Nepal. Cogent Economics and Finance, 11(1). https://doi.org/10.1080/23322039.2023.2191449
Primadiva, P. P., Rosdini, D., & Mulyani, S. (2021). Pengaruh tingkat kekayaan dan tingkat ketergantungan daerah terhadap kinerja pemerintah daerah. Jurnal Paradigma Ekonomika, 16(2). https://doi.org/10.22437/jpe.v16i2.11999
Ríos, A., Guillamón, M., Cifuentes?Faura, J., & Benito, B. (2022). Efficiency and sustainability in municipal social policies. Social Policy & Administration, 56(7), 1103–1118. https://doi.org/10.1111/spol.12843
Rodríguez Bolívar, M. P., López Subires, M. D., Alcaide Muñoz, L., & Navarro Galera, A. (2021a). The financial sustainability of local authorities in England and Spain: a comparative empirical study. International Review of Administrative Sciences, 87(1), 97–114. https://doi.org/10.1177/0020852319834721
Rodríguez Bolívar, M. P., López Subires, M. D., Alcaide Muñoz, L., & Navarro Galera, A. (2021b). The financial sustainability of local authorities in England and Spain: a comparative empirical study. International Review of Administrative Sciences, 87(1), 97–114. https://doi.org/10.1177/0020852319834721
Steiner, R., Kaiser, C., Tapscott, C., & Navarro, C. (2018). Is local always better? Strengths and limitations of local governance for service delivery. In International Journal of Public Sector Management (Vol. 31, Issue 4). https://doi.org/10.1108/IJPSM-05-2018-226
Suryaningsih, N. M., & Sisdyani, E. A. (2016). Karakteristik Pemerintah Daerah dan Opini Audit Pada Kinerja Keuangan Pemerintah Daerah. E-Jurnal Akuntansi Universitas Udayana, 15(2), 1453–1481.
Trussel, J. M., & Patrick, P. A. (2009). A predictive model of fiscal distress in local governments. Journal of Public Budgeting, Accounting & Financial Management, 21(4). https://doi.org/10.1108/jpbafm-21-04-2009-b004
United Nations. (2009). The role of public investment in social and economic development Public Investment: Vital for Growth and Renewal, but should it be a Countercyclical Instrument? Preface.
Wang, C. (2023). Local Government Financing in China: Fiscal Fatigue and Debt Sustainability. https://doi.org/10.1007/978-981-99-6441-3_13
Wardhani, D. T., & Payamta, P. (2020). Menguji Faktor Determinan Financial Sustainability pada Sektor Pemerintah. Jurnal Kajian Akuntansi, 4(1), 13. https://doi.org/10.33603/jka.v4i1.3305
Winarni, E., Ahmad, A. A., & Suharno, S. (2020). Pengaruh Investasi dan Belanja Modal terhadap Pertumbuhan Ekonomi di Provinsi Jawa Tengah. Jurnal Ilmiah Universitas Batanghari Jambi, 20(2), 447. https://doi.org/10.33087/jiubj.v20i2.946
Zamzami, F., & Rakhman, F. (2023). Determinants of Local Government Financial Performance in Indonesia. Academic Journal of Interdisciplinary Studies, 12(5), 332–347. https://doi.org/10.36941/ajis-2023-0148
Zulvan, M. F., & Purbasari, H. (2024). Pengaruh Investasi, Belanja Modal, dan Pendapatan Asli Daerah Pemerintah Daerah Terhadap Pertumbuhan Ekonomi. Jurnal EMT KITA, 8(1), 175–186. https://doi.org/10.35870/emt.v8i1.2095
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Published
2025-10-31
How to Cite
Fahira, A., Avianti, I., & Qadri, R. A. (2025). Determinants of Local Government Financial Sustainability: The Mediating Role of Reserve Funds. Quantitative Economics and Management Studies, 6(5), 758–767. https://doi.org/10.35877/454RI.qems4079
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