i
PERFORMANCE MEASUREMENT
EVOLUTION AND ACCOUNTABILITY
IN INDONESIAN REGIONAL
GOVERNMENTS
A thesis submitted in fulfilment of the requirements for the degree of Master of
Business (Accountancy)
MUHAMMAD THAHAR
SE (Universitas Syiah Kuala)
MAcc (The University of Western Australia)
School of Accounting
College of Business
RMIT University
May 2016
ii
Declaration
I certify that except where due acknowledgement has been made, the work is that of the
author alone; the work has not been submitted previously, in whole or in part, to qualify for
any other academic award; the content of the thesis is the result of work which has been
carried out since the official commencement date of the approved research program; any
editorial work, paid or unpaid, carried out by a third party is acknowledged; and, ethics
procedures and guidelines have been followed.
Muhammad Thahar
16 May 2016
iii
Acknowledgments
First of all I would like to thank God, Allah SWT for His blessings throughout my entire life.
Then, I would like to express my deepest gratitude to my supervisors Dr Gillian Vesty and Dr
Sue Robertson who have patiently assisted me during my research journey and given
invaluable guidance along my study.
My sincere appreciation goes to Associate Professor Prem Yappa, Professor Lee Parker (both
from RMIT University) and Prof Christopher Napier (from Royal Holloway University of
London) for their supportive comments during discussions in the candidature stages.
I also acknowledge the assistance of Bradley Smith, of Semiosmith Editing and Consulting
Services, for providing professional editing and proofreading of the entire thesis.
At this excellent opportunity, I would like to thanks my parents and my siblings who give me
endless support in pursuing my goals in life.
Finally, I dedicate this achievement to my beloved wife, and my sons, Faris Naufal and Fadel
Nadaffa. All of you have been gorgeous by willing to sacrifice your time for me and
struggling with a new environment without any complaint. Without all of you, this research
journey would have not been able to be accomplished.
iv
Table of Contents
Declaration ....................................................................................................................... ii
Acknowledgments ......................................................................................................... iii
Table of Contents ........................................................................................................... iv
List of Figures ................................................................................................................ vii
List of Tables ............................................................................................................... viii
Acronyms ........................................................................................................................ ix
Thesis Related Publication ............................................................................................. x
Abstract ........................................................................................................................... xi
Chapter 1: Introduction ................................................................................................. 1
1.1 Background .............................................................................................................. 1
1.2 Objective of the study and research questions ......................................................... 2
1.3 Contribution of the study ......................................................................................... 3
1.4 Key findings ............................................................................................................. 4
1.5 Outline of the thesis ................................................................................................. 6
Chapter 2: Literature Review ........................................................................................ 7
2.1 Introduction .............................................................................................................. 7
2.2 Public sector PMS.................................................................................................... 7
2.2.1 NPM and NPFM as impetuses for change ...................................................... 9
2.2.2 Corporate governance and good governance as more recent public
sector reform frameworks .......................................................................... 11
2.2.3 PMS adoption and impediments ................................................................... 13
2.3 Defining accountability in the public sector .......................................................... 17
2.4 Dimensions of accountability in the public sector ................................................. 21
2.4.1 Political accountability............................................................................... 22
2.4.2 Legal accountability ................................................................................... 23
2.4.3 Corporate and hierarchical accountability ................................................. 23
2.4.4 Financial accountability ............................................................................. 23
2.4.5 Performance accountability ....................................................................... 24
2.4.6 Vertical versus horizontal accountability ................................................... 26
2.4.7 External versus internal accountability ...................................................... 26
2.5 Management accounting reform in the Indonesian Government and the practices
of neighboring countries ........................................................................................ 27
2.6 Summary ................................................................................................................ 29
Chapter 3: Theoretical Framework ............................................................................ 30
3.1 Introduction ............................................................................................................ 30
v
3.2 New Institutional Sociology (NIS) as a lens.......................................................... 30
3.2.1 Isomorphic processes under NIS perspective ............................................ 33
3.3 NIS approach on performance measurement research .......................................... 36
3.4 Research questions ................................................................................................. 40
3.4.1 PMS motivation ......................................................................................... 40
3.4.2 PMS introduction and development overtime ........................................... 40
3.4.3 Major impediments to PMS development and implementation ................ 41
3.4.4 The extent of accountability....................................................................... 41
3.5 Research Process ................................................................................................... 42
3.6 Summary ................................................................................................................ 46
Chapter 4: Research Method ....................................................................................... 47
4.1 Introduction ............................................................................................................ 47
4.2 The nature of qualitative research and its philosophical assumptions ................... 47
4.2.1 The nature of qualitative research .............................................................. 47
4.2.2 Qualitative research philosophical assumptions ........................................ 48
4.3 Research design ..................................................................................................... 48
4.4 Method of data collection and data analysis .......................................................... 49
4.4.1 Sources of evidence ................................................................................... 49
4.4.2 Method of data analysis ............................................................................. 53
4.5 Methodological rigor ............................................................................................. 55
4.5.1 Credibility of research................................................................................ 56
4.5.2 Transferability of research ......................................................................... 58
4.5.3 Dependability ............................................................................................. 59
4.5.4 Confirmability ............................................................................................ 60
4.6 Ethical issues and data storage .............................................................................. 62
4.7 Summary ................................................................................................................... 62
Chapter 5: The Research Setting ................................................................................. 63
5.1 Introduction ............................................................................................................ 63
5.2 Indonesia in brief ................................................................................................... 63
5.3 The structure of the Indonesian Government ........................................................ 64
5.4 The concept of PMS and accountability in the Indonesian Government .............. 66
5.5 Summary ................................................................................................................ 67
Chapter 6: Findings ...................................................................................................... 69
6.1 Introduction ............................................................................................................ 69
6.2 The evolution of the Indonesian regional government PMS since 1999 ............... 69
6.2.1 The introduction of a PMS for accountability (1999-2003) ...................... 71
