There's a possible exploit here, depending on how this is implemented. If the same holds true for surrendering, I can enter any battle and use my archers to lower the enemy numbers, surrender, then return to the battle again, etc. Repeat till the enemy's gone and you've lost no units whatsoever.
Let's say it only works if your armies have been fully defeated/killed --- there's still a minor exploit here, where you go in a battle with 1, 2, or 3 squads. You defeat most of the enemy but you also let your squads be defeated. You enter with a new army and voila, ensured victory at the cost of 1, 2, or 3 squads (for the newer players this may seem like a lot of casualties, but trust me when you get to a certain point in the game you'll be happy to just solve an encounter no matter how many units you lose).
If this was to be implemented in any way, it would need a lot of restrictions and complications to make it work. I think it's not worth it, I'd rather just have something else changed in that regard (either lower the number of enemies per encounter, change the formula of how damage is applied, etc.).
