Wouldn't they also lose any bonuses the general had been providing to nearby units? So would they go from +x morale to -8?
The reaction to a killed leader would surely vary depending on the leader and the people following him. I imagine that there were some situations where a beloved leader was cut down, that it sent his followers into a frenzy, fighting furiously to avenge his death. In most situations though I imagine it would most likey cause a rout.
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