This research aims to assess the impact of bargaining power on budget implementation while also considering the deviation in capital expenditure as a moderating factor. The research sample included 34 provincial governments in Indonesia between 2019 and 2022. The sample determination method used purposive sampling, so the final sample size was 134 observations. The research employed panel data regression to test the hypotheses and continued with the Chow, Lagrange multiplier, and Hausman tests. The study results indicate that bargaining power has a positive and significant effect on budget implementation, with the deviation in capital expenditure not diminishing its impact. The research’s practical implication is that regional governments must effectively manage their revenues to finance regional spending needs through regional tax intensification and extensification policies. The study contributes to signaling theory by highlighting that regional governments can finance regional spending needs through fiscal independence and society’s involvement. It also contributes to agency theory by demonstrating that capital expenditure deviation in the form of information asymmetry in regional governments does not reduce their ability to finance regional expenditure needs. Nonetheless, the study suggests that the proxies used in this research are limited, and further exploration of other proxies to measure tested variables. This research provides new knowledge for stakeholders regarding the dynamics of regional budgeting, especially regarding assessing the impact of bargaining power on budget implementation and considering deviations in capital expenditure as a moderating factor.

Abdellateef Mah’d, O. (2014). The Ministry of Higher Education’s role in private Jordanian universities and the hidden tool of the budget. Education, Business and Society: Contemporary Middle Eastern Issues, 7(2/3), 133–151. https://doi.org/10.1108/ebs-01-2014-0009

Algifari. (2021). Pengolahan data panel untuk penelitian bisnis dan ekonomi dengan eviews 11. Yogyakarta: UPP STIM YKPN.

Amin, A., Juanda, B., & Rindayati, W. (2023). Effect of Fiscal Independence and Economic Growth on Reducing Poverty and Unemployment in Indonesia. Economics, Business, Accounting & Society Review, 2(2), 97–109. https://doi.org/10.55980/ebasr.v2i2.62

Benito, B., Guillamón, M., & Bastida, F. (2015). Budget Forecast Deviations in Municipal Governments: Determinants and Implications. Australian Accounting Review, 25(1), 45–70. https://doi.org/10.1111/auar.12071

Boukari, M., & Veiga, F. J. (2018). Disentangling political and institutional determinants of budget forecast errors: A comparative approach. Journal of Comparative Economics, 46(4), 1030–1045. https://doi.org/10.1016/j.jce.2018.03.002

Chapman, J. I. (2003). Local Government Autonomy and Fiscal Stress: The Case of California Counties. State and Local Government Review, 35(1), 15–25. https://doi.org/10.1177/0160323x0303500102

Choi, Y. S., Kim, M. O., Jung, H. R., et al. (2021). Bargaining power and budget ratcheting: Evidence from South Korean local governments. Management Accounting Research, 53, 100767. https://doi.org/10.1016/j.mar.2021.100767

Devlin, B. (1989). Basic Budget Primer: Choosing the best budget for your library. The Bottom Line, 2(3), 20–24. https://doi.org/10.1108/eb025181

Downs, A. (1957). An economic theory of democrarcy. Harper & Row. New York.

Drazen, A., & Eslava, M. (2010). Electoral manipulation via voter-friendly spending: Theory and evidence. Journal of Development Economics, 92(1), 39–52. https://doi.org/10.1016/j.jdeveco.2009.01.001

Dubois, E. (2016). Political business cycles 40 years after Nordhaus. Public Choice, 166(1–2), 235–259. https://doi.org/10.1007/s11127-016-0313-z

Evans, J., & Patton, J. M. (1987). Signaling and Monitoring in Public-Sector Accounting. Journal of Accounting Research, 25, 130. https://doi.org/10.2307/2491083

Gonschorek, G. J. (2021). Subnational favoritism in development grant allocations: Empirical evidence from decentralized Indonesia. World Development, 139, 105299. https://doi.org/10.1016/j.worlddev.2020.105299

Halim. A. (2007). Public sector accounting local financial accounting, 3rd ed. Jakarta: Salemba Empat.

Hansen, D. R., & Mowen, M. M. (2009). Managerial accounting, 8th ed. Jakarta: Salemba Empat.

Haraldsson, M. (2021). Capital expenditure deviations in a fragmented municipal context—the case of the Swedish municipal water and sewerage sector. Journal of Public Budgeting, Accounting & Financial Management, 34(6), 26–45. https://doi.org/10.1108/jpbafm-12-2020-0197

Herianti, E. (2019). Budget turbulence and budget deviation: Do local governments have the ability to reduce them? Jurnal Tata Kelola Dan Akuntabilitas Keuangan Negara, 1–20. https://doi.org/10.28986/jtaken.v5i1.285

Huang, C., & Chen, M. (2010). Playing devious games, budget‐emphasis in performance evaluation, and attitudes towards the budgetary process. Management Decision, 48(6), 940–951. https://doi.org/10.1108/00251741011053479

Idris, H., & Samsinar. (2022). The effect of expenditure growth and regional financial independence on GRDP during the covid-19 pandemic in South Sulawesi. National Seminar on Research Results 2022. LP2M-Universitas Negeri Makasar.

Indonesian Ministry of Finance. (2023). Available online: https://djpk.kemenkeu.go.id/ (accessed on 3 January 2024).

Jalali Aliabadi, F., Mashayekhi, B., & Gal, G. (2019). Budget preparers’ perceptions and performance-based budgeting implementation: The case of Iranian public universities and research institutes. Journal of Public Budgeting, Accounting & Financial Management, 31(1), 137–156. https://doi.org/10.1108/jpbafm-04-2018-0037

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Johansson, T., & Siverbo, S. (2014). The appropriateness of tight budget control in public sector organizations facing budget turbulence. Management Accounting Research, 25(4), 271–283. https://doi.org/10.1016/j.mar.2014.04.001

Mahardika, E. P., & Fauzan. (2022). The effect of local own-source revenue, general allocation funds, and capital expenditures on the level of regional financial independence: An empirical study on the Regency/City local government of Central Java Province in 2017–2019. Jurnal Ekonomi dan Bisnis, 11(1), 407–416.

Mahmudi. (2019). Analysis of local government financial statements, 4th ed. Yogyakarta: UPP STIM YKPN.

Mahmudi. (2020). Local government financial management. Jakarta: UPP STIM YKPN.

Marundha, A. (2020). Are local governments overconfident with the effect of budget forecast errors on budget deviation? Jurnal Tata Kelola Dan Akuntabilitas Keuangan Negara, 179–194. https://doi.org/10.28986/jtaken.v6i2.480

Ogujiuba, K. K., & Ehigiamusoe, K. (2014). Capital Budget Implementation in Nigeria: Evidence from the 2012 Capital Budget. Contemporary Economics, 8(3), 293–314. https://doi.org/10.5709/ce.1897-9254.147

Oktaviani, M. A., & Sari, D. P. (2020). The effect of regional independence, local government performance, and internal control systems on financial reporting accountability. Jurnal Akuntansi Dan Pajak, 21(01). https://doi.org/10.29040/jap.v21i1.1147

Oliewo, M. (2015). Low absorption of funds makes nonsense of the budget trillions. Business Daily. Available online: www.businessdailyafrica.com/analysis/nonsense-of-the-budget-trillions/539548-2760040-kuxeadz/index.html (accessed on 9 January 2024).

Paliova, I., & Lybek, T. (2014). Bulgaria’s EU Funds Absorption: Maximizing the Potential! IMF Working Papers, 14(21). https://doi.org/10.5089/9781475571684.001

Patty, J. R. (2019). Budget forecast errors and budget deviation: Financial capability index as a moderating variable. Jurnal Tata Kelola Dan Akuntabilitas Keuangan Negara, 157–175. https://doi.org/10.28986/jtaken.v5i2.353

Permatasari, D. A., & Trisnaningsih, S. (2022). The Effect of Independence, Effectiveness of Regional Original Revenue and Regional Expenditure on Regional Financial Performance. Jurnal Ilmiah Universitas Batanghari Jambi, 22(3), 1573. https://doi.org/10.33087/jiubj.v22i3.2581

Rafi, M., Ahmad, K., Bin Naeem, S., et al. (2020). Budget harmonization and challenges: understanding the competence of professionals in the budget process for structural and policy reforms in public libraries. Performance Measurement and Metrics, 21(2), 65–79. https://doi.org/10.1108/pmm-09-2019-0048

Ratmono, D., & Sholihin, M. (2017). Accrual-based regional financial accounting. Yogyakarta: UPP STIM YKPN.

Rakhman, F. (2019). Budget implementation in a risky environment: evidence from the Indonesian public sector. Asian Review of Accounting, 27(2), 162–176. https://doi.org/10.1108/ara-01-2018-0020

Rogoff, K. (1990). Equilibrium political budget cycles. American Economic Review, 80, 21–36.

Royda, R., & Riana, D. (2019). Analysis of Regional Financial Independence and Capability and its Effect on Regency/City Economic Growth in South Sumatra Province. Akuntansi Dan Manajemen, 14(2), 50. https://doi.org/10.30630/jakmenpnp.14.2.174

Schick, A. (2007). Performance Budgeting and Accrual Budgeting: Decision rules or analytic tools? OECD Journal on Budgeting, 7(2), 109–138. https://doi.org/10.1787/budget-v7-art11-en

Schick, A. (2014). The metamorphoses of performance budgeting. OECD Journal on Budgeting, 13(2), 49–79. https://doi.org/10.1787/budget-13-5jz2jw9szgs8

Sheehan, N. T. (2010). A risk‐based approach to strategy execution. Journal of Business Strategy, 31(5), 25–37. https://doi.org/10.1108/02756661011076291

Siregar, B. (2017). Public sector accounting: Accrual-based local government financial accounting, 2nd ed. Yogyakarta: UPP STIM YKPN.

Suhartini. (2019). The mechanism of accountability for the management of regional revenue and expenditure budgets in the perspective of state financial law. Jurnal de Jure, 11(2), 1–16.

Surya, B., Salim, A., Saleh, H., et al. (2021). Economic growth model and renewable energy utilization: perspective of natural resources management and sustainable development of the Gowa Regency South Sulawesi, Indonesia. International Journal of Energy Economics and Policy, 11(6), 68–90. https://doi.org/10.32479/ijeep.11676

Syamsuddin. (2017). The government whistleblowers in generating audit quality (a survey on provincial audit boards in South, Central, and West Sulawesi, Indonesia). International Journal of Law and Management, 59(6), 1046–1058. https://doi.org/10.1108/ijlma-08-2016-0069

Tehupuring, R. (2021). Mapping of budget stress in Indonesia: Consequence on budget implementation. Jurnal Tata Kelola Dan Akuntabilitas Keuangan Negara, 7(1), 39–57. https://doi.org/10.28986/jtaken.v7i1.542

Ulum, A. S., Rohman, A., Harto, P., et al. (2019). The role of natural resources on moderating the relationship between fiscal decentralization and corruption: Evidence from Indonesia. International Journal of Energy Economics and Policy, 9(1), 67–75.

Veiga, L. G., & Veiga, F. J. (2006). Political business cycles at the municipal level. Public Choice, 131(1–2), 45–64. https://doi.org/10.1007/s11127-006-9104-2

Wahyuningsih, T., Bugis, M., & Bin-Tahir, S. Z. (2019). Nalysis of the inequality on inter-regional and inter-time income distribution in Indonesia. Journal of Social Sciences Research, 5(1), 1–8.