When Compliance Stops Signaling: A Dual-Ledger Theory for Sustainable Digital Governance

In a growing number of administrative systems, public organizations are governed through digital indicator regimes: standardized indices of compliance, integrity, and risk, published as open data and often read by regulators and intermediaries as proxies for institutional quality. Such regimes rest on the assumption that measured conformity converts into public legitimacy, yet the relationship between measured performance and public trust is empirically weak and varies across countries, and in several indicator-governed fields, compliance scores have risen and converged, while legitimacy-relevant behavior has not. This article develops dual-ledger theory to explain one mechanism behind that pattern. Drawing on institutional, quantification, accountability, signaling, and legitimacy research, we theorize an endogenous loss of informational value: when a regime succeeds in compressing cross-unit variance in compliance scores (conformity drift), the compliance signal stops differentiating units (signal collapse), and audiences shift their legitimacy judgments toward behavioral signals the regime does not measure (behavioral substitution). A legitimacy gap opens that a single-ledger regime cannot detect. We formalize the theory in four assumptions and five propositions, each with an empirical specification; derive three diagnostics computable from data that indicator-governed fields already hold; and confine the theory by explicit scope conditions to public and quasi-public organizations. Indonesia’s electoral sector, where three institutionally distinct election management bodies with separate legal mandates publish compliance, risk, and participation indices for 38 provinces, provides a fully documented 2024 baseline for both ledgers and a pre-specified forward test. Sustainable digital governance, we argue, requires two ledgers, with the coupling between them as the governance signal.