That's certainly the theory, but it doesn't really work that way. The problem is that if you don't chase them, then there is no "outcome." It's just an endless loop of inconsequential battles.
On the contrary, I experienced it myself in my latest game.
Both my army and the enemy's army were at about 1300 men. Unfortunately, the enemy had better morale, and despite heavy losses on both sides, my army gets its ass handed to it.
The enemy army wins and start sieging my capital with about 800 men. My army flees in shattered retreat with about only 400 men left.
Thanks to the reinforcement in friendly territory, I quickly reinforce back to about 850 men and head back to my besieged capital. Guess what ? The enemy army, which is in hostile territory, has not reinforced and even has taken some losses from the siege events. They are now at about 700 men. With my 850 men army, I made short work of them.
I just hired some mercenaries to keep my dominant position, and eventually won the war.
Before 2.5, the enemy would have chased the last remnants of my defeated army just after the first battle to destroy it for good, and I would have lost the war.