Revealed Status Quo Bias and Financial Performance: Indirect Associations Through Financial Decision Quality in Public Water Utilities in Java, Indonesia

Behavioral finance research on public utilities remains limited, particularly studies that use archival organizational data to infer persistent decision patterns. This study examines whether revealed status quo bias (RSQB), defined as the persistence of indicators that were initially weak and failed to improve, is associated with financial decision quality and financial performance in Indonesian public water utilities. The dataset covers 110 utilities in Java and a 2021–2023 panel of 330 utility-year observations. RSQB is constructed from five managerially relevant indicators, whereas the Financial Decision Quality Index (FDQI) summarizes tariff adequacy, collection effectiveness, operating-cost control, and solvency. The main models use 107 complete observations, OLS with HC3 standard errors, province fixed effects, and controls for firm size, service coverage, and non-revenue water. RSQB is negatively associated with FDQI (p < 0.001), while FDQI is positively associated with ROE in the baseline linear model (p < 0.001). A 5000-resample bootstrap identifies a negative indirect statistical association through FDQI of −2.284 percentage points of ROE (95% CI [−3.719, −1.284]). A centered quadratic sensitivity model also identifies a positive FDQI-squared term (p = 0.023), indicating that the fitted FDQI-ROE association varies with the level of FDQI. The results remain broadly consistent across robustness checks, including a full-sample sensitivity analysis using all 110 utilities. The findings position financial decision quality as an important intermediate financial-decision index in the observed association between persistent non-improvement and financial performance, without implying a psychological diagnosis or definitive causal identification.