Analysis of Regional Financial Performance and Economic Growth: Cases in Regencies and Municipalities in Aceh Province

All information related to regional financial performance can be accessed by the public through officially published local government financial reports. This study aims to examine the effect of regional financial performance ratios on economic growth across regencies and cities in Aceh Province. Economic growth is measured by the growth rate of Gross Regional Domestic Product (GRDP), while regional financial performance is represented by the growth ratio of fiscal independence, the growth ratio of local revenue (PAD) effectiveness, the fiscal growth ratio, and the regional expenditure growth ratio. The population of this study includes all regencies and cities in Aceh Province, with a total sample of 23 local governments selected using a saturated sampling method, and an observation period of five years (2020–2024). Hypothesis testing is conducted using panel data regression analysis with a significance level of 0.05. The results show that the growth ratio of fiscal independence and the growth ratio of Region original income effectiveness have positive but insignificant effects on economic growth, while the fiscal growth ratio has a negative and significant effect on economic growth. In contrast, the regional expenditure growth ratio has a positive and significant effect on economic growth. These findings indicate that regional expenditure growth plays a more dominant role in driving economic growth than revenue-based fiscal indicators.