Firm Specific Factors and Performance of Islamic Banks in Nigeria

This study investigates the relationship between firm specific factors and the performance of Islamic banks in Nigeria over the period 2020Q1-2023Q4 for three sampled Islamic banks in Nigeria using the panel random effect regression technique as chosen by Hausman Test. This is due to the fact that the environment in which the Islamic banks operate differs in terms of regulation and operation. Hence, the need to conduct a Nigerian study on the subject matter using recent data. The objective of this study is to empirically investigate the effect of firm specific factors on the performance of Islamic banks in Nigeria. The empirical results revealed a direct (positive) and statistically significant relationship between Islamic bank performance and age. Besides, size and liquidity are firm specific factors that have significant inverse relationship with Islamic bank’s performance in Nigeria which is an indication of diseconomies of scale suffered by Islamic banks due to uncontrolled increase in size. More so, capital adequacy and asset quality positively influence bank performance but the impact was not significant at 5% level of significance. From the findings, the study concludes that liquidity, firm age and size are significant determinants of Islamic bank performance in Nigeria. The study recommends that Islamic banks should pay more attention to their liquidity, size and be sensitive to their age as it relates to their performance. And regulatory agencies should re-evaluate the prudential regulation measures for Islamic banks to help expedite the effect of capital adequacy to remain positive and become significant.