Analysis of Regional Financial Performance Ratios on Economic Growth in the Fiscal Decentralization Era in the Bakorwil II Region of East Java Province

Lidya Teresya; Syamsul Huda

doi:10.55927/ijsmr.v4i3.12

Authors

Lidya Teresya UPN “Veteran” Jawa Timur
Syamsul Huda UPN “Veteran” Jawa Timur

DOI:

https://doi.org/10.55927/ijsmr.v4i3.12

Keywords:

fiscal decentralization, regional financial performance, economic growth, panel data regression

Abstract

Regional governments have more power to oversee public finances and promote regional economic growth because to fiscal decentralization. The purpose of this study is to investigate how regional financial performance ratios affect economic growth in East Java Province's Bakorwil II region between 2015 and 2024. Using panel data from regional financial reports and the Central Bureau of Statistics, the study takes a quantitative approach and covers seven regencies and one municipality. EViews was used to do panel data regression analysis, and the Chow, Hausman, and Lagrange Multiplier tests were used to pick the model. The findings suggest that the activity ratio has a positive and substantial impact on economic growth, the effectiveness ratio has a negative and significant association, and the financial independence ratio has a positive but minor influence. These results emphasize the significance of public spending focused on development in fostering regional economic expansion.

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