Revenue diversification and financial sustainability – focus on higher education in Indonesia

Purpose This study aims to empirically test the effect of investment assets, income diversification, investment expenditures and funding structure (debt) on the financial sustainability of higher education institutions (HEIs). Design/methodology/approach We observed 20 State Universities with Legal Entity Status (PTNBH) in Indonesia from 2012 to 2023 and employed panel data regression to analyse data manually extracted from their financial reports. Findings Investment assets increase financial sustainability, while debt reduces it. However, income diversification and investment expenditure do not positively affect financial stability. New PTNBHs are more challenged to enhance financial stability because they are in the initial stage of investing, requiring resources apart from government grants and tuition fees to enhance income. Research limitations/implications This study utilizes HEIs in Indonesia, which the government encourages to increase financial independence by granting PTNBH status, marking the initial phase in improving financial independence and financial sustainability. Practical implications This study can be used as a basis for policy for higher education leaders to increase investment assets by commercializing tangible and intangible assets to increase financial stability. Originality/value This preliminary study evaluates the financial stability of PTNBHs and provides valuable recommendations to the government. Our research fills the gap by presenting literature on the financial stability of PTNBH.