THE IMPACT OF FINANCIAL CONDITION ON PUBLIC GOVERNANCE AMONG PROVINCIAL GOVERNMENT IN INDONESIA

Abstract

This study aims to investigate the impact of financial condition on public governance among provincial government in
Indonesia. Short-term solvency and financial flexibility were used as a proxy for financial condition. Meanwhile, public
governance was measured by The Index of Governance published by The Partnership for Governance Reform of
Indonesia. Local Government’s age was used as a control variable. Thirty three provincial governments indexed by The
Partnership for Governance Reform of Indonesia 2012were used as a sample. Results from multiple regression analysis
show that short-term solvency has a positive and significant association with the Governance Index (Public
Governance), but financial flexibility does not. Meanwhile, F-Test shows that financial condition variables
simultaneously affect public governance among provincial government in Indonesia. The result implies that a good
financial condition will make it easier for provincial government to implement good governance. Hence, good public
governance need a good financial conditions.

Keywords : Financial Conditions, Local Government, Public Governance, Local Autonomy