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Financial performance as a phenomenon in the European banking sector is an issue of a wide debate. The paper is seeking to detect the variables that have an impact on performance. Ratios and stratification variables are used in panel data regressions and the time period of the study is from 2004 to 2013. The results show that performance (ROAA) is dependent on four categories of ratios (Asset quality, Capital ratios/risk and solvency ratios, Operations ratios, Liquidity ratios). Corporate governance system and the geographic location (political and macroeconomic factors) of the bank seem to effect significantly the factors that have an impact on performance.

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

The inactivity of banks may be the result of a number of events, such as merger & acquisition (M&A), liquidation, default-bankruptcy, etc. All these phenomena of inactivity contribute to the same result, the reform of the European banking sector and they may have the same causes. 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). 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 European banking system is not isomorphic. The differences can be traced to the differences in their local economy development, legal origin, ownership status, corporate governance system, etc. The 2008 crisis has found the banking system of Europe in a transition status. The adoption of Euro, the establishment of the European Central Bank, the Basil III initiative, the adoption of legal isomorphism as policy in E.U., and finally the crises have been creating a unique environment for the banking system. The paper will address the issue of convergence of the banking system in Europe using a set of data from 27 countries of Europe. The analysis shows that the banks haven’t changed their financial and ownership structure. Some changes in strategy are not adequate to formulate the opinion that the banking sector in Europe is different than the one before it.

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.

Financial performance as a phenomenon in the banking sector is an issue of a wide debate. The paper is seeking to detect the variables that have an impact on performance. There are two ways that the paper is going to achieve its goal. The first is to find the statistical important variables – ratios and the second the use of stratification (corporate governance system and geographical location as an indication of the political and economic factors) variables that may diverge the behavior and hence the performance of banks across Europe. The data used for the empirical analysis cover the period from 2004 to 2013, 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 final sample (commercial and cooperative banks) is comprised from 2.721 to 3.081 (dependent on the availability of data for every ratio) individual cases. The data collected were mainly financial ratios and some stratifying variables (corporate governance system, north-south) and panel data regressions using stratifying variables were used. The results show that performance (roaa) is dependent on the other four categories of ratios (Asset quality, Capital ratios/risk and solvency ratios, Operations ratios, Liquidity ratios), the interesting part is which of them are found to be statistical important. Financial performance of banks is based on factors that are specific to the sector. Bad debt handling, asset quality, operational costs, finding other sources of income, interbank liquidity are the most important factors that affect performance. Corporate governance system and the geographic location (political and macroeconomic factors) of the bank seem to effect significantly the factors that have an impact on performance. Banks with an Anglo-Saxon corporate governance system and banks that are in north Europe present greater variance of performance and hence they seem to be less entrenched – protected from markets.

The economic crisis has caused great changes in Greek economy, which are obvious in the banking field as well. Under the light of these unpleasant circumstances, the banking system was (and maybe still is) in danger of collapsing, a possibility that would probably affect countries abroad. In order to avoid this collapse, the sustainable banks were further supported and the non-sustainable were purged. This strategy aimed to stabilize the financial system through bank mergers and acquisitions. The strategy chosen to support and purge the banks was to proceed to mergers and acquisitions. These mergers and acquisitions are realized by the bank employees and they are highly related to them as they intend to stabilize the employees’ uncertain future. In October 2012 a field research was realized in order to record the employees’ point of view when it comes to both their profession as it is now and the case of bank mergers and acquisitions. After processing the findings of the research, we extract the following conclusion, among others: bank mergers and acquisitions have a negative impact on the majority of the employees that seem to be worried about the limitation of their professional perspectives, the emergence of bad working conditions and ultimately a possible discharge. The findings of the research confirm the growing anxiety and uncertainty among the bank employees. In case of merger or acquisition, the employees prefer that either of these procedures will be held with another Greek bank rather than with a foreign bank. There is a new “wave” of mergers and acquisitions coming in the banking field in Greece, confirming thus the general sense shared by the community and the outcomes of the economic crisis.

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.

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.