Financial Performance and Human Development with Control of Regional Characteristics

Abstract

Regional autonomy is a policy given by the central government to local governments. The granting of this right to autonomy will encourage the acceleration of economic development in the community. Local governments begin to regulate all affairs in their regions independently so that they will be faster in overcoming all existing problems, including problems of community welfare. The implementation of regional autonomy also gives full rights to regional governments, including in financial management in the regions. Effective, efficient, transparent and responsible financial management is an important basis for improving the community's welfare. Of course, increasing the financial performance of local governments will also increase the human development index. The performance of the local government needs to be assessed as a form of our supervision to the government. This government performance assessment can be measured through the ratio of regional independence, effectiveness and efficiency. In addition, proper management of existing resources in the area will be able to improve the welfare of the community. The purpose of this study is to empirically test the ratio of independence, effectiveness, efficiency to the human development index by controlling regional characteristics in the form of capital expenditures, operational expenditures, government size, regional original income, and population. The amount of data in this study were 29 districts and 6 cities in Central Java during 2015-2019. The results of this study state that the independence ratio, effectiveness ratio, and efficiency ratio can have a significant effect on the human development index. In addition, the control variables for regional characteristics in the form of capital expenditures, operational expenditures, government size, and population are able to influence the human development index. Meanwhile, local revenue has no effect on the human development index.