Analysis of The Effect of Original Local Government Revenue, Central Transfers and Legitimate other income on Financial Independence of Regency/City of North Sumatra Province and Central Java Province with Implementation Expenditure Efficiency as a Moderating Variable

Abstract

The level of local financial independence is one of the indicators of regional financial success in carrying out regional autonomy and improving the quality of services in the regions. This study aims to determine and analyse the effect of local original income, central transfers and Legitimate other income on the level of Local financial independence in the regency/city governments of North Sumatra and Central Java provinces in 2010-2019. This study will also examine the variables for the application of spending efficiency, which are used as moderation variables in the study. This study used the object of the Regency/City Government of North Sumatra and Central Java Provinces. The type of data used is secondary data with the hypothesis test used is multiple linear regression analysis and interaction moderation variable test with the help of STATA software. The results of this study show that original local government revenue has a significant positive effect on the level of local financial independence, and central transfer has a significant negative effect on the level of local financial independence. In contrast, legitimate other incomes do not have a significant effect on the level of local financial independence. The results of this study also show that spending efficiency cannot moderate each of the influences of local original income, central transfer and legitimate other income to the level of financial independence of the region. Keywords: Original Local Government Revenue, Central Transfer, Legitimate other income, Expenditure Efficiency and Level of Local financial independence