A comparative analysis of efficiency in the Brazilian banking sector: A data envelopment analysis approach

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.