Does performance pressure accentuate outcome bias? Evidence from managerial dismissals

Fabienne Jedelhauser, Raphael Flepp, Pascal Flurin Meier and Egon Franck

Journal of Economic Behavior & Organization, 2025, vol. 236, issue C

Abstract: Outcome bias refers to the tendency to consider observed outcomes inappropriately in evaluations, such that the influence of luck is underestimated. However, observed outcomes that fall short of expectations simultaneously trigger performance pressure. We argue that performance pressure reinforces outcome bias in evaluation decisions such as managerial dismissals, particularly after bad luck. Using data from European football and a novel identification strategy, 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 increases. Importantly, this amplified outcome bias under performance pressure predominantly occurs in instances of bad luck. These results suggest that the extent of outcome bias has been underappreciated, especially in situations involving bad luck and performance pressure.

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)
Date: 2025
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Working Paper: Does Performance Pressure Accentuate Outcome Bias? Evidence from Managerial Dismissals (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:236:y:2025:i:c:s0167268125002057

DOI: 10.1016/j.jebo.2025.107086

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