Capital Expenditure Determinants in Central Java and East Java with Economic Growth as Moderating Variable

Indira Januarti,Ceacilia Srimindarti,Pancawati Hardiningsih,Maryono Maryono

doi:10.24856/mem.v35i1.1183

Indira Januarti, Ceacilia Srimindarti + Show 2 more

Open Access

https://doi.org/10.24856/mem.v35i1.1183

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Abstract

This study aims to analyze the effect of local own revenue, balance funds and area size on capital expenditure with economic growth as a moderating factor for district / city governments in Central and East Java Provinces. The population in this study are all districts / cities in Central Java and East Java Province. This research uses census method. The secondary data used in this study is in the form of 2015-2017 APBD realization reports obtained from the Director General of Fiscal Balance of the Regional Government, while data on economic growth and area size were obtained from BPS of Central and East Java Provinces. The analysis technique uses structural equation models with Partial Least Square. The results showed that regional original income and balance funds had a significant positive effect on capital expenditure in Central and East Java. The area size has a positive and significant effect on capital expenditure for Central Java but not for East Java. Economic growth moderates the effect of regional income on capital expenditure. Economic growth moderates balance funds towards capital expenditure for Central Java but not for East Java. Overall there is no difference in capital expenditure across districts / cities in the two provinces

Highlights

The enactment of regional autonomy provides an opportunity for regional governments to further develop regional potentials, the authority to manage regional resources efficiently and effectively, and to improve regional financial performance in the context of realizing regional independence
Based on the results and discussion of this study, this condition showed that Central Java and East Java Provinces still depend on the central government, it is necessary to increase Local Own Revenue (LOR) to become an independent province
Exploring the potential of LOR can be done through the form of intensification and intensification needs to get the attention of the regional government, including fixing regulations related to increasing LOR

Summary

Introduction

The enactment of regional autonomy provides an opportunity for regional governments to further develop regional potentials, the authority to manage regional resources efficiently and effectively, and to improve regional financial performance in the context of realizing regional independence. Local governments are expected to be able to optimize the potential of regional resources to improve the welfare of the community. The optimization is explicitly stated in the Budget Revenue and Expenditure Regional (BRER) as a medium for regional development revenue and financing, Including the allocation of public budgets for public purposes such as capital expenditure. The capital expenditure budget is adjusted to the regional needs for facilities and infrastructure for the smooth implementation of government tasks and for public facilities. In an effort to improve the quality of public services, local governments need to change the composition of spending. Utilization of expenditure should be allocated to productive things, for example to carry out development activities (Tuasikal, 2008)

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