Financial reporting compliance in Indonesian local governments: Mimetic pressure dominates

Abstract

This study empirically examines the level of mandatory disclosure within financial statements of lo- cal governments in Indonesia by using institutional theory. Indonesia is the world’s largest muslim country that has recently undergone comprehensive public sector reform. There is a moderate level of compliance with key mandatory disclosures (49.9%). The highest level of communication is on is- sues relating to Fiscal Policy (81.2%) whereas the lowest level is for Macro-Economic issues (33.6%). Regression analysis shows that the mimetic isomorphism variable, measured by jurisdiction is positive and significant predictors of the extent of mandatory disclosure. Local governments that are located in Java disclose more than non-Java, and older local governments also have higher man- datory disclosures.