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Many scholars have linked Corporate Governance (CG) and performance or CG, capital structure of banks or market structure. The decision to use the capital market or debt in order to obtain the necessary capital to finance firms’ operations is a critical factor for the formulation of corporate environment, because it contributes to the ownership concentration or diffusion and to corporate risk exposure level. The paper’s goal is to link all these three dimensions and to address the issue of whether performance and capital structure are the decisive factors of good corporate governance or vice versa and whether these dimensions are the drivers of banks’ financial health, strategic robustness and survival effectiveness. Furthermore, the paper is seeking to detect the differences (if any) among banking systems across Europe. To do that a double sample is selected (covering the period from 2004 to 2013). The first sample is comprised by European banks that merged. The second sample is comprised by European banks that survived the last merger & acquisition wave and the systemic shock of the double crises of 2002 and 2008. A combined ratio of performance (ROAA or ROEA) and debt to equity (DE or debt aggravation) is used to determine if there is a connection between capital structure and CG quality of banks. Panel data methodology is used. The econometric results show that there are no significant differences between the strata that are used for this research. There is no common factor or driver between the banking systems of Europe. This is an indication that the convergence theory of corporate governance systems is yet confirmed

Objectives The paper’s first goal is to track the behavior, financial structure and corporate governance schemes of the European banks before, during and after the crises of 2001 and 2008, the regulatory initiatives that followed. The second goal is to determine the status of the sector in Europe and to clarify if there is a convergence trend. Data and Methods The data used for the empirical analysis cover the period from 2005 to 2014, is focused on the twenty-seven (27) European Union countries. The data were collected from Bankscope and the initial sample was 8.115 individual banks. The data collected were financial, board of directors, ratings (banks and country), investment ratios, etc. The variables used are categorized into six groups of indicators or dimension: ratings (country and bank), size, ownership, corporate governance, capital adequacy or capital structure and loan growth. Since this is the first approach of a large sample and number of variables, the paper’s methodology is simple (descriptive statistics, cross-tabulation, mean and variance differences, etc.). Results The results show that the European banking sector has taken two major shocks and these shocks have left their mark financially, structurally and on their governance mechanisms. Major changes have taken place, but these changes don’t seem to re-enforce any convergence trend. Conclusions The stability of the sector is based on structural elements (competition, capital structure, regulation, etc.) and its performance. The results also show that the European banking sector is not homogenized. There are significant differences in size, spatial distribution, performance, financial structure, etc.

The chapter explores the relation among sovereign debt ratings, individual bank ratings and bank financial status. Credit Rating Agencies (CRA) are crucial to the function of financial markets. Two main blocks of models have been designed to investigate the above relations. The first block uses a constructed binary variable for Fitch’s ranking of European banks. The second block tries to identify the relation between financial performance and ratings. The data used for the empirical analysis, covering the period from 2004 to 2011, focus on the commercial banks of the 27 European Union countries. The statistical results show the close relation among sovereign debt, bank ratings and performance. The statistical importance of this relation is an indicator that external—exogenous factors (CRA) can play a significant role in formulating the economic environment, especially in times of crisis.

The goal of the paper is to detect the factors that affect financial performance of the European banks and the cross – sectional differences that may exist. The European banking sector is interesting due to its special characteristics and structure. The stability of the sector is based on structural elements (competition, capital structure, regulation, etc.) and its performance. The paper addresses the issue of the banking sector performance using two different econometric approaches. In both blocks of research ROA is used ROA as a performance index for Europe’s banks. The first approach has been realized by using four econometric methods [LAD (least absolute deviations), RREG (robust regression), ordinary least squares (OLS) and Quantile regressions] and the second approach is panel data regressions (Fixed and Random Effects) and tries to find if there are differences among different panels of European banks (PIGS-not PIGS, North-South, Entity type, Corporate governance system). The independent variables used in both groups of research can be categorized into six groups of indicators: ratings (country and bank), size, ownership, corporate governance, capital adequacy or capital structure and loan growth. The data used for the empirical analysis cover the period from 2004 to 2011, is focused on the twenty seven (27) European Union countries. The statistical results show that performance of banks in Europe is dependent on predictable factors and on factors like the credit ratings. The results also show that the European banking sector is not homogenized. There are significant differences in size, spatial distribution, performance, financial structure, etc. This results are important because as performance is not homogenized and the factors that determine performance have different weight in each subsystem, the European banking system is not isomorphic. Hence, each subsystem must have a different set of rules and strategies to enhance performance. The results are especially important for policy makers and explaining the events of the recent history.

The crises of 2002 and 2008 have raised the issue of banking sector’s ability to absorb the effects of the crises. The inactivity of banks may be the result of a number of events, such as merger & acquisition (M&A), liquidation, default-bankruptcy, etc. Bankruptcy has been found to be a phenomenon that doesn’t happen often. On the contrary, M&As and liquidation are the main inactivity phenomena.The paper will address the issue of inactivity and will try to detect its causes using econometric models. Six groups of indicators are examined: performance, size, ownership, corporate governance, capital adequacy or capital structure and loan growth. Three econometric methods (Probit, Logit, OLS) have been used to create a system that predicts inactivity.The results of the econometric models show that from the six groups of indicators, four have been found to be statistically important (performance, size, ownership, corporate governance). Two have a negative impact (ownership, corporate governance) on the probability of inactivity and two positive (performance, size). This finding is consistent with the theory. The paper’s value and innovation is that it has given a systemic approach to find indicators of inactivity and it has excluded two groups of indicators as non-statistically important (capital adequacy or capital structure and growth).

The crises of 2002 and 2008 have raised the issue of banking sector’s ranking system efficiency. The credit rating agencies (CRAs) are crucial for the modern financial market. The impact that the ratings have is indisputable. This paper is seeking to find the factors that affect the ratings and to create a prediction mechanism. The originality of the paper is based on the fact that it utilizes a number of different variables (ownership status, corporate governance, etc.), and the hypothesis is innovative because it addresses the issue of divergence–convergence of the European banking sector and its respective ratings. In order to do that, all ranking evaluations have been matched with a numerical value (i.e., AAA has value 24, A- has value 18, and B- has value 9). A good grade is considered to be above A- (value 18) and a bad grade below that number. Seven groups of indicators are examined: performance, size, ownership, corporate governance, capital adequacy or capital structure, sovereign–country ranking, and loan growth. Three econometric methods (probit, logit, and OLS) have been used to create a system that predicts the rating grade. The independent variable is binary (good grade = 1/bad grade = 0). Inactive banks have been excluded from the sample. This paper provides a model for predicting the factors that affect the grade of the bank rating. Many of the factors, which other studies have pointed out, are found to be statistically important in our models, too. This paper contributes to the literature by establishing a unique framework for the European banks and identifying the factors that affect the rating grade by giving an answer to the issue of an isomorphic banking sector in Europe. It shows that there are significant differences among the various geographical regions [variables cgsys, ns, European countries with major economic problems or those under stress (Portugal, Ireland, Spain, and Greece)].

Capital structure, especially in the cases of the countries that belong in the Continental Europe system of Corporate Governance has a significant impact on the way that the firm is structured, organizationally, strategically and functionally. The decision to use the capital market or debt in order to obtain the necessary capital to finance firms’ operations is a critical factor for the formulation of corporate environment, because it contributes to the ownership concentration or diffusion and to corporate risk exposure level. Debt aggravation is measured by the ratio “Debt to Equity”. Panel data methodology is used. The hypothesis that are tested: a) is debt aggravation affected by the quality of corporate governance, the structure and composition of the Board of Directors, firm’s size, and other factors, b) are the factors that affect debt aggravation in Greece the same with the ones that are delineate in the literature for the Anglo-Saxon countries. Debt aggravation is statistically affected by performance, organizational structure and firm size. These findings are compatible with the literature. The innovative finding is that variables like Corporate Governance Index (CG), Mergers and Acquisitions (Merger), Major shareholder is the CEO (OWNCEO) and den dismissal or resignation of, executive, non executive (BDIS_P) and independent members of the Board of Directors are not statistical important. Corporate Governance does not seem to have any statistical important impact on capital structure and this conclusion is the opposite of the relevant studies of Shleifer and Vishny (1997) and Vilanova (2007). Greek firms seem to favor debt as a mean of finance, instead of capital-share issues.