ABSTRACT

The purpose of this study was to ascertain the effect of financial structure on financial performance of conventional and Islamic banks in Nigeria. However, in order to achieve the objectives of this study, we utilised four explanatory variables as proxies for financial structure (capital adequacy ratio, non-performing loans, liquidity and asset quality) and (return on assets) as proxy of financial performance. The study covered a time period of 2015-2021 (7years) and utilised four (4) Islamic Banks and thirteen (13) conventional banks in Nigeria as the sample size.  The study adopted the ordinary least squares technique for the data analysis. The findings revealed that: capital adequacy ratio has a positive and asset quality have a significant relationship with financial performance of conventional and Islamic banks in Nigeria; Non-performing loans has a negative and significant relationship with financial performance of conventional and Islamic banks in Nigeria; and liquidity has a positive and insignificant relationship with financial performance of conventional and Islamic banks in Nigeria. Based on this findings, the following recommendations were made that: banks should prioritize maintaining and bolstering their capital reserves; banks should employ rigorous credit appraisal techniques and conduct periodic reviews of their loan portfolios; banks should consistently evaluate and improve their asset portfolios; banks should strike a balance between holding sufficient liquid assets for transactional purposes and investing in longer-term, higher-yield assets; and it is imperative they develop risk management strategies attuned to their specific operational nuances.