<![CDATA[The paradigm of fiscal decentralization requires local governments to secure fiscal sovereignty by optimizing local revenues. However, empirical data shows that the financial independence ratio across 35 regencies and cities in Central Java Province during the 2024-2025 fiscal period remains heavily reliant on central subsidies. This study aimed to examine and analyze the empirical effect of capital expenditure and the level of dependency on regional financial performance. Employing a quantitative causal-associative design, saturation sampling was utilized to generate 70 balanced panel observations. Grounded in Stewardship Theory, this research evaluates how structural economic behaviors influence fiscal self-sufficiency. The Double-Log panel data regression, using the selected Random Effect Model (REM), demonstrated that capital expenditure has a positive but non-significant effect on regional financial performance. This is attributed to the long-term gestation period required for public infrastructure to stimulate the local economy. Conversely, the level of dependency exerted a highly significant negative impact, empirically confirming that massive central government transfers trigger a paralyzing flypaper effect, ultimately destroying local administrative incentives to optimize original revenues. These findings imply that escaping the flypaper trap demands a profound commitment from local leaders to digitally reform sub-national tax administration and drastically reduce reliance on external transfers.]]>
Copyrights © 2026
