Does Performance Pressure Accentuate Outcome Bias? Evidence from Managerial Dismissals

Fabienne Jedelhauser (), Raphael Flepp (), Pascal Flurin Meier () and Egon Franck
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Fabienne Jedelhauser: Department of Business Administration, University of Zurich
Raphael Flepp: Department of Business Administration, University of Zurich
Pascal Flurin Meier: Department of Business Administration, University of Zurich

No 402, Working Papers from University of Zurich, Department of Business Administration (IBW)

Abstract: Outcome bias refers to the tendency to overweight the informativeness of observed outcomes in evaluations, consequently underestimating the influence of luck. However, observed outcomes that fall short of expectations simultaneously trigger performance pressure, potentially reinforcing outcome bias in evaluation decisions such as managerial dismissals. Using data from European football, we investigate whether managerial dismissal decisions are influenced by luck operationalized as opponent player injuries and whether this influence is more pronounced under performance pressure. Our findings reveal that luck significantly impacts dismissal decisions, particularly as performance pressure mounts. Importantly, this amplified outcome bias under performance pressure is predominantly driven by instances of bad luck. These results suggest that the extent of outcome bias has been underappreciated, especially in situations involving bad luck.

Keywords: Outcome Bias; Luck; Performance Pressure; Managerial Dismissal; Principal-Agent Setting (search for similar items in EconPapers)
JEL-codes: D81 D86 D91 J44 Z2 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-05
New Economics Papers: this item is included in nep-hrm, nep-lma and nep-spo
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Persistent link: https://EconPapers.repec.org/RePEc:zrh:wpaper:402

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