Articles
DOI DOI: 10.62441/actainnovations.v63i.1113

FINANCIAL GOVERNANCE INNOVATION AND COOPERATIVE RESILIENCE: RISK-MITIGATION EFFECTIVENESS IN TOP-DOWN RURAL INSTITUTIONS

Made Susilawati1, Sylvia2, Dwi Dersmi Selan 3
  1. 1 Department of Accounting, Universitas Persatuan Guru 1945 NTT, Kupang, Indonesia.
  2. 2 Department of Accounting, Institut Teknologi dan Bisnis Nobel Indonesia, Makassar, Indonesia.
  3. 3 Department of Accounting, Universitas Persatuan Guru 1945 NTT, Kupang, Indonesia.

Abstract

This study explores the potential for integrated governance innovation for building organizational resilience in state-mandated village cooperatives in rural emerging economies. These cooperatives differ from traditional bottom-up cooperatives. For the former, state policies and initiatives establish the cooperatives, and the aspiration is for them to draw on large lines of commercial credit from the start. However, evidence from the field indicates that most of the state-mandated cooperatives refuse to draw on commercial credit. We used an explanatory sequential mixed-method design. The survey of 96 village cooperatives was conducted in East Nusa Tenggara, Indonesia. We evaluated the survey data employing the PLS-SEM method. We used Harman’s single factor and full collinearity variance inflation factor assessments to evaluate potential risks of common method bias. The qualitative component of the design was based on thematic analysis of the cross-role individual interviews and role specific focus group discussions with joint display integration of the two strands. The structural model accounts for 60.6% of the variance in cooperative resilience (R² = 0.606; SRMR = 0.062). Direct effects of COSO ERM implementation on resilience are positive (β = 0.265, t = 2.626, p = 0.009). The greatest portion of the effect (βindirect = 0.414, t = 5.986, p < 0.001; VAF = 61.0%) is a partial mediation effect of a complementary configuration of risk mitigation. These are qualitative findings grounded in institutional theory. From the kinship-oversight paradox, communal solidarity (gotong royong) creates loyalty during shocks, while the inability to maintain financial discipline leads to a decline in contractual obligations and default enforcement, resulting in organizational failure. Participants describe a structural liquidity tension resulting from a combination of fixed start-up capital that is tied up and thin cash buffers that are left to service debt, along with village administration exposure to political pressure from the programming of credit. Viable pathways for the cooperative beyond the incubation period include measures such as accounting and reporting; social accountability; and mandatory liquidity reserves with a gradual shift of ownership to cooperative members. These measures serve the cooperative's alignment with the SDGs and address decent work and economic growth (SDG 8), resilient rural financial systems (SDG 9), and reduced inequalities within and among countries (SDG 10).

How to Cite

Susilawati, M., Sylvia, & Selan , D. D. (2026). FINANCIAL GOVERNANCE INNOVATION AND COOPERATIVE RESILIENCE: RISK-MITIGATION EFFECTIVENESS IN TOP-DOWN RURAL INSTITUTIONS. ACTA INNOVATIONS, 63, 454–471. https://doi.org/10.62441/actainnovations.v63i.1113
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