Congressional Briefing - February 25, 2008

How Does Sarbanes-Oxley Affect Firms' Decisions to Stay in the Public Market or Go Private?

Small business meeting


Pinar Karaca-Mandic


Monday, February 25, 2008


1:00 pm - 2:00 pm


304 Cannon House Office Building
Washington, D.C.

About the Program

In 2002 Congress passed the Sarbanes-Oxley Act (SOX) to strengthen corporate governance and restore investor confidence. The legislation came in the wake of major corporate and accounting scandals that shook public confidence in investment markets. While the intent of the legislation is clear, its ultimate effects, particularly for small firms, continue to be debated. Many small businesses were left to wonder if the benefits of SOX justified their costs.

Researchers at the Kauffman-RAND Institute for Entrepreneurship Public Policy studied this issue more in depth by examining firm exits from the public market once SOX was implemented. The goal was to determine the net effects of SOX. Findings include:

  • SOX induced small firms to exit public securities markets in the first year of its enactment, suggesting that some firms thought the net benefits of SOX were not worth the costs.
  • These effects were short-lived, which could be due to a number of reasons: large upfront costs at the initial implementation of SOX; foreign countries tightening regulations; or vulnerable firms exiting the market immediately.

Dr. Pinar Karaca-Mandic will discuss findings from the RAND study as well as the positive and negative policy implications of these current trends.

About the Speaker

Pinar Karaca-Mandic

Pinar Karaca-Mandic, Ph.D., is an adjunct economist at RAND and an assistant professor at the University of Minnesota School of Public Health, Division of Health Policy and Management. She is involved in projects at RAND that focus on the impact of various legislations and reforms on small businesses, such as the Sarbanes-Oxley Act of 2002, state small group health insurance reforms, and the Medicare Prescription Drug Improvement and Modernization Act of 2003. Dr. Karaca-Mandic earned her Ph.D. in Economics from University of California at Berkeley in 2004.

RAND Office of Congressional Relations

For 60 years, RAND has provided policymakers with independent, objective research and analysis on key national security, domestic and international issues. RAND work helps members of Congress and their staffs make better-informed decisions on the nation's pressing challenges. The Office of Congressional Relations offers a number of products and services to educate, inform, and facilitate congressional policymakers' access to RAND work, including coordinating congressional testimony by RAND experts, organizing briefings and meetings, synthesizing RAND work into topical e-newsletters and providing reports and publications to congressional offices. For more information, visit the Office of Congressional Relations webpage, contact or call (703) 413-1100 x5395.

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Further Inquiries

For further information about this event, contact the Office of Congressional Relations at or call (703) 413-1100 x5395.