Optimation Principles of Good Financial Governance to Increase Financial Sustainability

Abstract

Studies on good governance related to financial sustainability are still limited. This study analyzes the relationship between five principles ofgood financial governanceand financial sustainability. Thefive principles, namely Transparency, Accountability, Responsibility, Independence, and Fairness, each is tested for its effect on Financial Sustainability. Additionally, this research examines the moderating effect of Information Technology (IT) Capability. The object of this research is private universities in Indonesia which are surveyed through closed questionnaires and they were represented by their financial management leaders. Data from 627 private universities from 13 provinces in Indonesia were analyzed using structural equation modeling (SEM). The results of data analysis showed a significant positive effect of transparency (β=0.238), accountability (β=0.142), and responsibility (β=0.255) on financial sustainability, while independency and fairness were found to have no significant effect. The results of the moderation test do not entirely support the hypothesis. The study results complement the study of the influence of good governance on financial sustainability as this study examines the effect of each principles of good governance on financial management. The practical implication for private universities is to improve financial sustainability they should improve good financial governance particulary on the aspects of transparency, accountability, and responsibility.