Does the Flypaper Effect Phenomenon Occur on the Financial Performance of Provincial Governments in Indonesia?

Abstract

The purpose of this research is to detect the flypaper effect phenomenon on the financial performance of provincial governments in Indonesia. This research uses one dependent variable, namely regional expenditure and two independent variables, namely the General Allocation Fund (GAF) and local own-source revenue (OSR). The data used in this research is secondary data in the form of panel data consisting of time series data (2018-2022) cross section with the number of observations as many as 33 provinces. Then, this research data was collected from the Directorate General of Financial Balance, Ministry of Finance of the Republic of Indonesia and other supporting reports. This research was analyzed using panel data regression analysis. Based on the results of panel data regression, results were obtained Based on the results of panel data regression, results were obtained that partially each variable local own-source revenue (OSR), The General Allocation Fund (GAF) has a positive and significant impact on the regional level of exploration in Indonesia. Meanwhile, simultaneously local own-source revenue (OSR), General Allocation Fund (GAF) has a positive and significant impact on regional expenditure in Indonesia with an Adjusted R-squared amount of 97.07 percent. Then, if you look at the flypaper effect phenomenon, it can be concluded that there is a flypaper effect on the financial performance of provincial governments in Indonesia. Based on the results of this study, each provincial government in Indonesia should increase Local Own-Source Revenue (OSR) to be used as the main source of regional expenditure, then local governments should also prioritize the use of regional expenditure for productive things, so that the existence of central government transfer funds can increase the independence of government financial performance and ultimately can minimize dependence on the central government.