Eliminating the effects of external environmental factors to improve the analysis of local government financial condition: a study in Indonesia

IMPACTIn a heterogeneous external environment, it is irrelevant and unfair if the central government applies a single financial management policy to all local governments. This article provides a solution in the form of a method to eliminate heterogeneous external environmental effects. The conceptual framework developed in this study can be adopted by countries with a high degree of local government heterogeneity to develop regional financial management policies, such as analysing financial conditions or financial management performance, which are more relevant, fair and accurate.