Financial Statistical Journal (2023) Volume 6 Issue 2 doi: 10.24294/fsj.v6i2.2150 1 Original Research Article A comparative analysis of efficiency in the Brazilian banking sector: A data envelopment analysis approach Alex Cerqueira Pinto 1 , Mathias Schneid Tessmann 2,* 1 Quantitative Methods and Finance Graduate Program, University of Brasília, Brasília 73345-010, Brazil 2 School of Management, Economics and Business, Brazilian Institute of Education, Development and Research, Brasília 70200-670, Brazil * Correspondence author: Mathias Schneid Tessmann, mathias.tessmann@idp.edu.br ABSTRACT This work aims to analyze the efficiency of Brazilian financial institutions until the COVID-19 pandemic period, from production and profitability perspectives. To accomplish this, the data envelopment analysis (DEA) techniques, specifically the CCR and BCC models, are applied to 213 Brazilian financial institutions in four methodological stages. The first step involved conducting a literature review of similar studies. The second step consisted of gathering financial information for each bank through the website of the Central Bank of Brazil. The third step involved selecting the variables to be used in the models. The fourth step was outlier detection using the jackstrap method. Subsequently, the mentioned efficiency models were applied, and the most efficient banks were identified based on each perspective. The results identified heterogeneous groups of efficient banks based on different market segments, with a focus on the efficiency of large banks and public banks when considering the production-oriented perspective. It is also observed that new digital banks are among the banks considered efficient. These findings are valuable for the scientific literature investigating the sustainability of financial institutions, as well as for decision-makers seeking to make more efficient investment allocations and for banking supervisory authorities in formulating risk regulatory policies. Keywords: banking efficiency; DEA; production and profitability approach 1. Introduction The analysis of the importance of efficient financial institutions is fundamental to the proper functioning and development of an economy. Banks play a crucial role in the efficient allocation of financial resources, facilitating investment financing, access to credit, and risk management. Furthermore, banks that operate efficiently play an important role in reducing information asymmetries, aiming to provide transparency and trust to market participants. According to Staub et al. [1] , the development of the banking system and the increase in its efficiency are related to greater economic growth. In this sense, institutions with low levels of efficiency can become insolvent, causing losses to depositors and compromising the soundness of the financial system. The main contribution to a bank’s long-term strategy is the assessment of its activities from the perspective of performance and efficiency. A developed and efficiently functioning banking system facilitates the development of other spheres of business in the national ARTICLE INFO Received: 22 May 2023 Accepted: 10 July 2023 Available online: 4 January 2024 COPYRIGHT Copyright © 2024 by author(s). Financial Statistical Journal is published by EnPress Publisher, LLC. This work is licensed under the Creative Commons Attribution- NonCommercial 4.0 International License (CC BY-NC 4.0). https://creativecommons.org/licenses/by- nc/4.0/