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

Khairudin, Rosmiati Tarmizi, Indrayenti, Aminah and Kamaruzzaman Muhammad*
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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

The Journal of Social Sciences Research, 2018, 1035-1039 Special Issue: 5

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.

Keywords: Financial performance; Financial ratios; Community welfare; Local Governments; Indonesia. (search for similar items in EconPapers)
Date: 2018
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