DETERMINANTS OF CAPITAL EXPENDITURE AND ITS EFFECT ON REGIONAL FINANCIAL PERFORMANCE: A STUDY ON DISTRICT AND CITY IN WEST NUSA TENGGARA PROVINCE OF INDONESIA

Abstract

The purpose of this study is to test and provide empirical evidence regarding the effect of regional revenue (PAD), balance funds (DP) and excess budget financing (SiLPA) on capital expenditure and to see how capital expenditure affects a regional financial performance. Tests were carried out in 10 districts and cities on NTB Province using Financial Report data from 2012 to 2018 using Partial Least Square (PLS) analysis. The results showed that PAD had a significant and positive effect on capital spending, while DP and SiLPA had no effect on capital spending. This shows that the district and city governments on NTB Province have made maximum use of PAD in realizing their capital expenditures, whereas the local governments have not been able to maximize the balance funds that sourced from the Central Government and SiLPA in realization a number of capital expenditures. The results of this study are expected to be able to provide an overview of how district and city governments in NTB Province manage local revenue both PAD and balance funds to realize capital expenditures that directly impact government services to the community and this research can be taken into consideration in assessing regional financial performance by principals (society) against its agent (government).

Keywords

• local own revenue
• intergovernmental revenue
• capital expenditure
• financial performance