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Does Performance Pressure Accentuate Outcome Bias? Evidence from Managerial Dismissals

Author

Listed:
  • Fabeienne 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)

  • Egon Franck

    (Department of Business Administration, University of Zurich)

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.

Suggested Citation

  • Fabeienne Jedelhauser & Raphael Flepp & Pascal Flurin Meier & Egon Franck, 2024. "Does Performance Pressure Accentuate Outcome Bias? Evidence from Managerial Dismissals," Working Papers 402, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:zrh:wpaper:402
    as

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    File URL: http://repec.business.uzh.ch/RePEc/zrh/wpaper/402_IBW_full.pdf
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    References listed on IDEAS

    as
    1. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Outcome Bias; Luck; Performance Pressure; Managerial Dismissal; Principal-Agent Setting;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • Z2 - Other Special Topics - - Sports Economics

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