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The increasing use of state-mandated public high school exit exams is one manifestation of the current movement in U.S. public schooling toward more explicit standards of instruction and accountability. Exit exam requirements implicitly argue that raising the bar for graduation creates incentives both for students to work harder in school and for schools to increase their efforts for low-achieving students. Such incentives should most strongly affect the motivation of students who fail an exit exam the first time they take the test because failing provides a clear signal of students’ need to improve their academic skills. Others argue that failing an exit exam discourages low-achieving students from staying in school. In this article, the authors use a regression discontinuity design and student-level longitudinal data from four large California public school districts to estimate the effect of failing a high school exit exam in 10th grade on subsequent student achievement, course taking, persistence in high school, and graduation. The analyses show no evidence of any significant or sizeable effect of failing the exam on high school course-taking, achievement, persistence, or graduation for students with test scores near the exit exam passing score. In each case, the estimates are precise enough to rule out modest to large effects. This implies that the negative impacts of high school exit exam policies on graduation rates found in other studies are more likely a result of reduced graduation rates of very low-achieving students than of discouragement of marginally low-achieving students.