Flypaper Effect on Regional Expenditure and the Imp on Regencies/Municipalities Financial Performance in Indonesia

DOI

10.2991/aebmr.k.220602.054How to use a DOI?

Keywords

flypaper effect; financial performance; local revenue; general allocation funds; special allocation funds; profit sharing funds

Abstract

The aim of this study was to empirically evidence the phenomenon of the flypaper effect on regional revenue, general allocation funds, special allocation funds, and profit-sharing funds on regional expenditures and the impact of the flypaper effect on financial performance in regencies/cities in Indonesia. This study used panel data regression with secondary data taken from all regencies/municipalities in Indonesia registered under the DJPK RI for the 2017-2020 period. The sample in this study consisted of 1968 regencies/cities selected by the purposive sampling method. The result of this study showed that regional revenue, general allocation funds, special allocation funds, and profit-sharing funds had a positive effect on regional expenditures and there was a flypaper effect phenomenon due to the transfers of general allocation funds and profit-sharing funds. Furthermore, the result of the research indicated that there was flypaper effect to decrease the financial performance of local government. This implies that regencies/municipalities in Indonesia are still dependent on transfer funds (flypaper effect) and have a negative effect on financial performance, making regencies/ municipalities in Indonesia are subsidiary to manage their finances and extensive supervision of local governments and policies are needed to support sectors in the regions that need require them while maintaining rational budget management in order to optimize the potential of regional revenues.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article distributed under the CC BY-NC 4.0 license.

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TY  - CONF
AU  - Muhammad Yudhistira A
AU  - Erma Setiawati
AU  - Zulfikar Zulfikar
PY  - 2022
DA  - 2022/06/13
TI  - Flypaper Effect on Regional Expenditure and the Imp on Regencies/Municipalities Financial Performance in Indonesia
BT  - Proceedings of the International Conference on Economics and Business Studies (ICOEBS 2022)
PB  - Atlantis Press
SP  - 411
EP  - 425
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220602.054
DO  - 10.2991/aebmr.k.220602.054
ID  - A2022
ER  -