Budget ratcheting can serve as a moderator the relationship between financial performance and capital expenditure since it can help the government to control spending related to capital expenditure. This study aimed to examine the effect of financial performance and budget ratcheting on capital expenditure, and the ability of budget ratcheting to moderate the relationship between financial performance and capital expenditure. The population in this study were all districts/cities in Aceh Province for the 2019-2021 period. From 23 samples within three-years observation, 69 observations were conducted using balanced panel data. The data analysis employed multiple linear regression and path analysis. The results showed that financial performance, as well as budget ratcheting, had an effect on capital expenditure, and budget ratcheting was able to moderate the relationship between financial performance and capital expenditure.

financial performance; capital expenditure; budget ratcheting