The Influence of Regional Financial Performance Indicators on Economic Growth in West Java Province

Maria Kristi Ningsi Usfinit; Agustina Suparyati

Authors

Maria Kristi Ningsi Usfinit Universitas Trisakti Fakultas Ekonomi Dan Bisnis
Agustina Suparyati Universitas Trisakti Fakultas Ekonomi Dan Bisnis

Keywords:

Capital Expenditure, Regional Independence, Economic Growth, Tax Ratio, Fiscal Transfer

Abstract

Regional economic growth is related to the government's ability to manage financial resources effectively. This study aims to analyze the effect of Tax Ratio, Effectiveness of Regional Original Revenue (PAD), Regional Financial Dependence, Regional Independence, and Capital Expenditure on Economic Growth in regencies and cities of West Java Province for the period 2020–2024. The study uses an explanatory quantitative approach with an ex post facto design. The population and sample cover 27 regencies and cities over five years, resulting in 135 observations. Secondary data were collected through documentation from BPS, DJPK, and related institutions, then analyzed using panel data regression with a Fixed Effect Model (FEM). The results show that Tax Ratio has a positive and significant effect on Economic Growth (coefficient = 8.131506; p = 0.0418), Regional Financial Dependence has a positive and significant effect (coefficient = 0.293316; p = 0.0000), Regional Independence has a positive and significant effect (coefficient = 0.765158; p = 0.0000), and Capital Expenditure has a positive and significant effect (coefficient = 16.65972; p = 0.0001), while PAD Effectiveness has no significant effect (coefficient = -0.024537; p = 0.1982). The coefficient of determination (Adjusted R²) is 0.425251, indicating that the five variables explain 42.53% of the variation in Economic Growth. In conclusion, Tax Ratio, Regional Financial Dependence, Regional Independence, and Capital Expenditure are significant factors associated with Economic Growth, while PAD Effectiveness is not significant

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