Do Physiological and Spiritual Factors Affect Economic Decisions?

58 Pages Posted: 17 Mar 2017 Last revised: 2 Sep 2020

See all articles by Cem Demiroglu

Cem Demiroglu

Koc University, College of Administrative Sciences and Economics

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Rui Silva

NOVA School of Business and Economics; Centre for Economic Policy Research (CEPR)

Mehmet Fatih Ulu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Date Written: April 1, 2019

Abstract

We examine the effects of physiology and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003-2013, we find that small business loans originated during Ramadan are 12 to 17 percent more likely to become delinquent within two years of origination. We find no Ramadan effect for personal loans which are mostly automated, or large business loans where approval decisions are made by credit committees. Loans originated in hot summer Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Charitable lending does not appear to be a key driver of the Ramadan effect. Despite their worse performance, Ramadan loans have lower credit spreads.

Keywords: Ramadan; fasting; nutrition; spiritual sentiment; judgment errors; bank lending; religion; religious practice

JEL Classification: G02; G21; Z12

Suggested Citation

Demiroglu, Cem and Ozbas, Oguzhan and Silva, Rui and Ulu, Mehmet Fatih, Do Physiological and Spiritual Factors Affect Economic Decisions? (April 1, 2019). Marshall School of Business Working Paper No. 17-22, Available at SSRN: https://ssrn.com/abstract=2933328 or http://dx.doi.org/10.2139/ssrn.2933328

Cem Demiroglu (Contact Author)

Koc University, College of Administrative Sciences and Economics ( email )

Koc University
Sariyer
Istanbul, 34450
Turkey
90-212-338-1620 (Phone)
90-212-338-1653 (Fax)

HOME PAGE: http://https://sites.google.com/site/cemdemiroglu/

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
213-740-0781 (Phone)
213-740-6650 (Fax)

Rui Silva

NOVA School of Business and Economics ( email )

Rua da Holanda, no. 1
Carcavelos, 2775-405
Portugal

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mehmet Fatih Ulu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

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