Business Confidence, TCA Adaptation, and Export Performance

ERC Insight paper

Associated Themes
  • Business Growth
  • Internationalisation

Business confidence or business sentiment is a measure of how a firm’s managers perceive the external environment and how they feel about their current and future business prospects.i,ii It has both objective and subjective elements. The objective elements relate to business perceptions of both the facts of the operational environment and the arguments being presented about future expectations, while the subjective element relates to how a firm’s management assesses its specific business conditions.
Business sentiment matters because business decisions are likely to be affected by it, although exactly how this occurs remains debatable.iii The expectations of business owners/managers drive their strategic and operational decisions,iv including those to do with the firm’s capital structure, investment, M&A, innovation, and dividends.v,vi Business sentiment is also used to track changes in businesses’ perceptions of export barriers over time.vii