The Impact of Firm Level and External Characteristics on the comparative performance between Islamic and Conventional Banks in Nigeria

Abstract

This study investigates the impact of firm level and external characteristics on financial performance of Islamic banks in Nigeria. The study determined the financial performance of Islamic banking in Nigeria against conventional banking services between 2012 and 2020. In this study, regression diagnostics such as multi-collinearity and heteroscedasticity were carried out to determine whether an assumption of linear regression were violated. These helped to check the robustness or otherwise of the regression results. Furthermore, both fixed and random effect tests were conducted. On the comparison between the financial performance of DMBs and Islamic banks in Nigeria, the study concludes that DMBs in Nigeria have better financial performance when compared to Islamic Banks in Nigeria within the periods under review. This better performance may be due to better corporate governance practices, better technology, smaller operating costs, availability of more products. and robust risk management practices. In line with the findings, the study recommends a better corporate governance practice, better technology, reduced operating costs, more diverse products, and robust risk management practices for Islamic banks in Nigeria, whist the conventional banks are advised to do more in this regard with a view to enhance financial performance.