Do Physiological and Spiritual Factors Affect Economic Decisions?

53 Pages Posted: 17 Mar 2017 Last revised: 15 Apr 2019

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

London Business School - Department of Finance

Mehmet Fatih Ulu

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

Date Written: April 2019

Abstract

We examine the effects of nutrition and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting from dawn to sunset and increased spiritual reflection in the Muslim faith. Using an administrative data set of all bank loans originated in Turkey during 2003-2013, we find that small business loans originated during Ramadan are about 10 to 15 percent more likely to become delinquent within two years of origination than loans originated outside of Ramadan. Despite their worse performance, Ramadan loans have lower credit spreads than non-Ramadan loans at origination. Consistent with Ramadan-induced judgment errors committed by individual loan officers, we find no relation between origination in Ramadan and the performance of personal loans which are mostly automated, and large business loans where approval decisions are made by credit committees. Loans granted by banks whose loan officers are more likely to observe the Ramadan perform worse, and so do loans originated on hot Ramadan days when adverse physiological effects of fasting are greatest, and loans that resemble charitable lending involving financially strong lenders. Our identification strategy addresses alternative explanations including seasonality and changing borrower and loan characteristics during Ramadan.

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 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

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
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

Register to save articles to
your library

Register

Paper statistics

Downloads
206
Abstract Views
1,273
rank
145,197
PlumX Metrics