Published date: Jul 04 2024

Journal Title: KnE Social Sciences

Issue title: The 3rd Jakarta Economic Sustainability International Conference (3rd JESICA)

Pages: 399–412

DOI: 10.18502/kss.v9i20.16544

Nova Anggrianinovaanggriani535@gmail.comFaculty of Economics and Business, Tadulako University, Palu, Indonesia

Andi Chairil FurqanFaculty of Economics and Business, Tadulako University, Palu, Indonesia

Latifah Sukmawati YuniarFaculty of Economics and Business, Tadulako University, Palu, Indonesia

Shinta Megawati SitorusRegional Research and Innovation Agency, Central Sulawesi Province, Indonesia

Financial performance is a measure of assessing the sustainability of an organization. This study aims to analyze how disaster risk impacts local governments’ financial performance as measured by the Disaster Risk Index (DRI). This study uses data from Local Governments in Indonesia for 2015-2021 with a total sample size of 3766 observations. The results show that the DRI negatively impacts the level of local autonomy, financial flexibility, and service solvency. However, the DRI has no bearing on short-term solvency. The results are robust to different measurements of the DRI, whether using scores or DRI categories, particularly the negative impact of the DRI on the level of regional autonomy and service solvency. These findings have implications for efforts to improve the financial performance of local governments and reduce disaster risk (DRR). Therefore, as a strategy to enhance financial performance while maintaining regional financial sustainability, local governments need tot establish policies and disaster mitigation programs oriented toward disaster risk reduction.

Keywords: DRI, financial performance, level of regional autonomy, financial flexibility, service solvency

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