This study aims to analyze the effect of fiscal illusions, budgetary slack, flypaper effects, and local financial distress on local financial performance and local government performance. Data collection used documentation studies with a total sample of 85 cities in indonesia. SEM (structural equation modeling) analysis was applied as a analytical tool with assistant of Smartpls 3.0 software. The result show a significant and positive impact of fiscal illusions, and flypaper effect on local financial performance, while non-significant direct effect was found between budgetary slack and financial performance. The results provide theoretical and practical implications for stakeholders in order to improve the performance of local governments in indonesia.
Keywords : Fiscal Illusion; Budgetary Slack; Flypaper Effect, Local Financial Distress, Local Financial Performance, Local Government Performance.