Determinants Influencing the Level of Corruption in Indonesia Local Governments

Muhammad Syauqi Qur’Ani Putra Ariva,Ermawati

doi:10.22610/jebs.v12i4(j).3059

Abstract

This study is based on the high levels of corruption occurring in Indonesia, indicated by the low level of the Corruption Perception Index (CPI). The majority of corruption cases occurring in Indonesia involves local governmental institutions. The high levels of corruption in local governments is related to government size, fiscal decentralization, and audit findings. The aim of this study is to determine the factors that cause the high levels of corruption in local governments. This study uses the agency theory as theoretical basis to formulate a framework of thought that connects government size, fiscal decentralization, audit findings, and corruption levels. The result of this study shows that the variables of government size, fiscal decentralization, audit findings, all have significant effects towards corruption levels. Fiscal decentralization and audit findings have a negative effect towards corruption level, while the government size variable has a positive effect on corruption levels. This study provides contribution to the practices of auditing, government execution, law enforcement, and corruption control initiatives in local governments in Indonesia

Highlights

Corruption is one of the issues in developing countries (Olken, 2007)
Corruption is still a significant issue in Indonesia. This is reflected by the Corruption Perception Index (CPI) score obtained by Indonesia in 2018, which is 40 points, despite the fact that the government has published steps to decrease corruption in Indonesia, after the political and economic crisis in 1998
This study aims to identify the relationship between government size, fiscal decentralization, audit findings, law enforcement, and corruption level in local governments in Indonesia

Summary

Introduction

Corruption is one of the issues in developing countries (Olken, 2007). The practice of corruption in government bodies causes the decrease of governmental performance in managing resources, decrease of national revenue from the tax sector, the distortion of public expenditure, and the decrease of public infrastructure quality. Countries with a stable economic condition tend to have a higher CPI score compared to developing countries This is due to the fact that the Gross Domestic Product (GDP) is an influencing factor in predicting corruption in a country (Bernaldez, 2014). There have been improvements with regards to regulation, decentralization, and law enforcement supremacy that have been implemented since the institutional reformation at the end of the 1990s, which caused economic and political crisis in Indonesia. This event drove Indonesia to become more democratic, decentralized, and regulated (Henderson & Kuncoro, 2011)

Objectives

Results

Conclusion