Determinants of Financial Reporting Quality: Evidence from Local Governments in Sumatera Island
Abstract
This study aims to investigate determinants of financial reporting quality (FRQ) local government in Sumatera Islands, Indonesia. The FRQ local government is proxied by audit opinion from the Indonesian Supreme Audit Board (ISAB) for each local government sample. The tested independent variables are capital expenditure, characteristics of local governments (size, financial independency, and local government status), and mayor’s characteristics (experience and age). Data were obtained from the summary of semester audit results of ISAB, official website of the ministry of finance and the local governments in Sumatera Island. Total samples are 143 local governments and the period of study is 5 years (2016 – 2020, or 715 observations). Using the multinomial logistic regression, this study found that a lower ratio of capital expenditure, smaller local governments, local government in city areas, and local governments led by older and experienced mayor are associated with higher financial reporting quality. This study also uncovered that mayor education level and mayor graduated from the Institute of Public Administration (or IPDN) have positive influence of financial reporting quality of the local governments.
Keywords
Full Text:
PDFReferences
Andirfa, M., Basri, H., & Majid, M. S. A. (2016). Pengaruh belanja modal, dana perimbangan dan pendapatan asli daerah terhadap kinerja keuangan kabupaten dan kota di Provinsi Aceh. Jurnal Administrasi Akuntansi: Program Pascasarjana Unsyiah, 5(3), 30–38.
Avis, E., Ferraz, C., & Finan, F. (2018). Do government audits reduce corruption? Estimating the impacts of exposing corrupt politicians. Journal of Political Economy, 126(5), 1912-1964.
Casadesús de Mingo, A., & Cerrillo-i-Martínez, A. (2018). Improving records management to promote transparency and prevent corruption. International Journal of Information Management, 38(1), 256–261. https://doi.org/10.1016/j.ijinfomgt.2017.09.005
Cohen, J.R., Krishnamoorthy, G., and Wright, A. (2004). The corporate governance mosaic and financial reporting quality. Journal of Accounting Literature, 23, 87–152.
Cuganesan, S., Hart, A., & Steele, C. (2017). Managing information sharing and stewardship for public-sector collaboration: a management control approach. Public Management Review, 19(6), 862–879. https://doi.org/10.1080/14719037.2016.1238102
Donaldson, L., & Davis, J. H. (1991). Stewardship theory or agency theory: ceo governance and shareholder returns. Australian Journal of Management, 16(1), 49–64. https://doi.org/10.1177/031289629101600103
Firmansyah, A., Arfiansyah, Z., & Yuniar, M. R. (2022). Local governments financial reporting quality in Papua and west Papua: Do local government characteristics matter? Jurnal Riset Akuntansi Kontemporer, 14(2). https://doi.org/10.23969/jrak.v14i2.5552
Glaeser, E. L., & Resseger, M. G. (2010). The complementarity between cities and skills. Journal of Regional Science, 50(1), 221–244. https://doi.org/10.1111/j.1467-9787.2009.00635.x
Guillamón, M. D., Bastida, F., & Benito, B. (2011). The determinants of local government’s financial transparency. Local Government Studies, 37(4), 391–406. https://doi.org/10.1080/03003930.2011.588704
Hambrick D. C, & Fukutomi, G. D. S. (2015). The seasons of a ceo’ s tenure. 16(4), 719–742.
Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334-343. https://doi.org/10.5465/amr.2007.24345254
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The Organization as a reflection of its top managers. The Academy of Management Review, 9(2), 193–206. https://doi.org/10.2307/258434
Huang, H. W., Rose-Green, E., & Lee, C. C. (2012). CEO age and financial reporting quality. Accounting Horizons, 26(4), 725–740. https://doi.org/10.2308/acch-50268
International Federation of Accountants. (2014). International ethics standards board for accountants - handbook of the international code of ethics for professional accountants. In IESBA Code of Ethics.
Jiang, F., Zhu, B., & Huang, J. (2013). CEO’s financial experience and earnings management. Journal of Multinational Financial Management, 23(3), 134–145. https://doi.org/10.1016/j.mulfin.2013.03.005
Julitawati, E., Darwanis, & Jalaluddin. (2012). Pengaruh pendapatan asli daerah (Pad) dan dana perimbangan terhadap kinerja keuangan pemerintah kabupaten/kota di provinsi Aceh. Jurnal Akuntansi Pascasarjana Universitas Syiah Kuala, 1(1).
Kim, J., Kim, Y., & Zhou, J. (2017). Languages and earnings management. Journal of Accounting and Economics, 63(2–3), 288–306. https://doi.org/10.1016/j.jacceco.2017.04.001
Kühn, S., & Sherman, L. B. (2014). Curbing corruption in public procurement: a practical guide. Transparency International.
Lee, H. J., Oh, H. G., & Park, S. M. (2020). Do trust and culture matter for public service motivation development? Evidence from public sector employees in Korea. Public Personnel Management, 49(2), 290–323. https://doi.org/10.1177/0091026019869738
Liu, J., & Lin, B. (2012). Government auditing and corruption control: Evidence from China’s provincial panel data. China Journal of Accounting Research, 5(2), 163–186. https://doi.org/10.1016/j.cjar.2012.01.002
Lo, K. (2008). Earnings management and earnings quality. Journal of Accounting and Economics, 45(2–3), 350–357. https://doi.org/10.1016/j.jacceco.2007.08.002
Matsunaga, S. R., & Yeung, E. (2011). Evidence on the impact of a CEO’s financial experience on the quality of the firm’s financial reports and disclosures. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1014097
McLeod, R. H., & Harun, H. (2014). Public sector accounting reform at local government level in Indonesia. Financial Accountability and Management, 30(2), 238–258. https://doi.org/10.1111/faam.12035
Mustapha, U. A., & Obasi, R. (2021). The influence of ceo characteristics on financial reporting quality in Nigerian non-financial listed companies. Journal of Contemporary Issues in Business and Government, 27(02). https://doi.org/10.47750/cibg.2021.27.02.01
Mutiha, A. H. (2017). Analisis kinerja keuangan pemerintah daerah kota Bogor tahun anggaran 2010-2014. Jurnal Vokasi Indonesia, 4(2). https://doi.org/10.7454/jvi.v4i2.63
Neu, D., Everett, J., & Rahaman, A. (2014). Preventing corruption within government procurement: Constructing the disciplined and ethical subject. Critical Perspectives on Accounting, 28. https://doi.org/10.1016/j.cpa.2014.03.012
Nuraeni. (2017). The impact of local governments characteristics to audit quality Indonesia perspectives. Jurnal Keuangan Dan Perbankan, 16(1), 87–103.
Nuraeni, N., & Martani, D. (2012). The impact of local governments characteristics toward their audit quality for financial reports of 2008-2009. In Airlangga Accounting International Conference & Doctoral Colloqulum 2012 (pp. 1-25).
Nurmayanti M, P., & Rakhman, F. (2017). CEO origin, CEO tenure, and earnings quality: empirical evidence from Indonesia. SHS Web of Conferences, 34, 07003. https://doi.org/10.1051/shsconf/20173407003
Nurmayanti, P., Indrawati, N., & DP, E. N. (2022). Top management characteristics and earnings management strategies: Evidence from Indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 9(2), 169–188. https://doi.org/10.24815/jdab.v9i2.25664
Okfitasari, A. (2015). Karakteristik pemerintah daerah dan kualitas pelaporan keuangan pemerintah daerah. Saintech Politeknik, 2(4).
Pahlevi, A. R., & Setiawan, D. (2017). Apakah karakteristik kepala daerah berdampak terhadap kinerja pemerintahan? Jurnal Akuntansi Multiparadigma, 8(3), 571–582. https://doi.org/10.18202/jamal.2017.12.7074
Peni, E. (2014). CEO and chairperson characteristics and firm performance. Journal of Management and Governance, 18(1), 185–205. https://doi.org/10.1007/s10997-012-9224-7
Peraturan Pemerintah No. 71 Tahun. (2010). Tentang Standar Akuntansi Pemerintah.
Peraturan Pemerintah No 12 Tahun. (2019). Tentang Pengelolaan Keuangan Daerah.
Pranestianegara, W., & Sari, R. P. (2021). Implementasi kinerja keuangan, realisasi belanja modal, dan pengelolaan manajemen aset negara. Seminar Nasional Akuntansi …, 1(1), 525–541.
Pratiwi, R., & Aryani, Y. A. (2017). Pengaruh karakteristik pemerintah daerah, kepala daerah, tindak lanjut temuan audit terhadap opini. Jurnal Akuntansi, 20(2), 167. https://doi.org/10.24912/ja.v20i2.52
Qi, B., Lin, J. W., Tian, G., & Lewis, H. C. X. (2018). The impact of top management team characteristics on the choice of earnings management strategies: Evidence from China. Accounting Horizons, 32(1), 143–164. https://doi.org/10.2308/acch-51938
Rakhman, F., & Wijayana, S. (2019). Determinants of financial reporting quality in the public sector: Evidence from Indonesia. The International Journal of Accounting, 54(03), 1950009.
https://doi.org/10.1142/S1094406019500094
Sasmita, R. P. H. (2021). Pengaruh karakteristik pemerintah daerah dan opini audit BPK terhadap understandability dalam kualitas laporan keuangan. Modus, 33(1), 98–119.
Schillemans, T., & Bjurstrøm, K. H. (2020). Trust and verification: balancing agency and stewardship theory in the governance of agencies. International Public Management Journal, 23(5), 650–676. https://doi.org/10.1080/10967494.2018.1553807
Schillemans, T., & Busuioc, M. (2015). Predicting public sector accountability: From agency drift to forum drift. Journal of Public Administration Research and Theory, 25(1), 191–215. https://doi.org/10.1093/jopart/muu024
Simbolon, H. A. U., & Kurniawan, C. H. (2018). Pengaruh karakteristik pemerintah daerah terhadap tingkat pengungkapan laporan keuangan di seluruh provinsi Indonesia. Modus, 30(1), 54–70.
Suhardjanto, D., & Yulianingtyas, R. R. (2011). Pengaruh karakteristik pemerintah daerah terhadap kepatuhan pengungkapan wajib dalam laporan keuangan pemerintah daerah (studi empiris pada kabupaten/kota di Indonesia). Jurnal Akuntansi dan Auditing; Volume 8, Nomor 1, Tahun 2011DO - 10.14710/Jaa.8.1.30-42 .
Tavares, A. F., & da Cruz, N. F. (2020). Explaining the transparency of local government websites through a political market framework. Government Information Quarterly, 37(3), 0–1. https://doi.org/10.1016/j.giq.2017.08.005
Warren, L., & Jack, L. (2018). The capital budgeting process and the energy trilemma - A strategic conduct analysis. British Accounting Review, 50(5), 481–496. https://doi.org/10.1016/j.bar.2018.04.005
Xu, Q., Fernando, G. D., & Tam, K. (2018). Executive age and the readability of financial reports. Advances in Accounting, 43(April), 70–81. https://doi.org/10.1016/j.adiac.2018.09.004
DOI: https://doi.org/10.24815/jdab.v11i1.31788
Article Metrics
Abstract view : 0 timesPDF - 0 times
Refbacks
- There are currently no refbacks.
Published by:
Accounting Department collaborated with IAI KAPd (Institute of Indonesia Chartered Accountant)
Faculty of Business and Economics
Syiah Kuala University
Kopelma Darussalam, Banda Aceh, Indonesia - 23111
ISSN: 2355-9462, E-ISSN: 2528-1143
Jurnal Dinamika Akuntansi dan Bisnis by Prodi Akuntansi Universitas Syiah Kuala is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at http://www.jurnal.usk.ac.id/JDAB/index.