The Role of Regional Financial Management in Supporting Sustainable Economic Growth: Evidence from Indonesian Provinces
DOI:
https://doi.org/10.59890/ijgsr.v4i7.270Keywords:
Regional Financial Management, Sustainable Economic Growth, Indonesian Provinces, Fiscal Decentralization, Capital ExpenditureAbstract
This study investigates the role of regional financial management in supporting sustainable economic growth across Indonesian provinces over the period 2018–2024. Employing panel data regression with fixed effects, this research analyzes how key financial management indicators including locally-generated revenue (PAD), capital expenditure allocation, fiscal independence ratio, and regional financial efficiency, influence the Gross Regional Domestic Product (GRDP) growth of 34 Indonesian provinces. The findings reveal that capital expenditure and fiscal independence ratio exert a significant and positive effect on provincial economic growth, while excessive dependence on intergovernmental transfers (DAU/DAK) tends to reduce regional economic dynamism. The study further demonstrates that quality financial management, characterized by transparency, accountability, and output-oriented budgeting, acts as a mediating mechanism through which fiscal resources are transformed into sustainable developmental outcomes. These results carry important policy implications, suggesting that strengthening local revenue mobilization and improving expenditure quality are essential strategies for achieving the Sustainable Development Goals (SDGs) at the subnational level in Indonesia
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