DETERMINANTS OF BUDGET FORECAST ERRORS AND THEIR IMPACTS ON BUDGET EFFECTIVENESS: EVIDENCE FROM INDONESIA

Baldric Siregar, Lilis Susanti
2019 Journal of Economics, Business & Accountancy  
The purpose of this paper is to identify the determinants of budget forecast errors and explore the impact of the errors on the budget effectiveness. The differences of this study differs from earlier studies including covering 90% of districts and cities, other studies on budget forecast error have not addressed how financial and governmental characteristics effect budget forecast error, and using a structural model to test the factors effecting budget forecast error and their impacts on
more » ... effectiveness. The hypotheses tested including revenue growth, expenditure growth, delays in budget approval, government complexity, and government type impacts on budget forecast errors and the errors impact on budget effectiveness. The data are derived from Central Bureau of Statistics and local government website. We use data of 444 local government for the period of 2006 to 2013. Partial least square is used to test hypotheses. The results show that the significant factors affecting budget forecast errors are revenue growth, expenditure growth, and government complexity. The higher the revenue growth the greater the likelihood of budget forecast errors. Likewise, the greater the spending growth the greater the budget forecast errors. The empirical evidence also suggests that budget forecast errors are bad for the economy.
doi:10.14414/jebav.v21i3.1468 fatcat:qdgld4mrijfydgmf7wy4xlppyy