GROWTH EXPECTATIONS AND FINANCIAL PERFORMANCEOF SMALL BUSINESSES. EVIDENCE FROM LATVIA

By applying regulatory focus theory, this paper investigates the impact of both initialconfidence and of exactness of growth expectations on subsequent financialperformance of the small firms. Drawing on the unique data set based on the repeatedsurvey design, we make one of the first attempts to explore the complexity of thisrelationship empirically. Overall the findings suggest that controlling for otherrelevant factors, including actual growth, the entrepreneurs having higher growthexpectations perform significantly better later on in terms of profitability. In addition,education has a strong modifying effect: the impact of high growth expectations onsubsequent profit performance is stronger for entrepreneurs with lower level ofeducation.....