That depends. Poor performance on exams taken too early in schooling can affect self-esteem and academic avoidance behaviors. Of course, better performance can be motivating and contribute positively to self-image. In my professional opinion, schools test too much, and too early. My own children went to a private school thru K-8 without grades and without exams (except for practice ones for those ready to graduate to public schools). The two that have gone on to public high school have done fine and one who has gone to college is thriving. So, I think it is a case of properly using exams. There are many, many ways to assess children's progress in school besides testing.