Does performance pressure accentuate outcome bias? Evidence from managerial dismissals

• Observed outcomes that fall short of expectations simultaneously create performance pressure, potentially reinforcing outcome bias. • We focus on managerial dismissals in European football, using key opponent player injuries as novel measure of luck. • Outcome bias is accentuated under performance pressure, with the effect mainly driven by bad luck. • Ignoring the impact of performance pressure may lead to an underestimation of outcome bias in principal-agent settings. 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.