The Ramifications of the Gilmer Decision for Firm Profitability

The impact of Gilmer v. Interstate/Johnson Lane Corp., was assessed by examining the effect of the decision on shareholder returns in two samples of firms. Shareholder returns of securities firms rose between 5% and 6% in response to the decision, indicating that firms in the securities industry benefited substantially from being able to require that their employees arbitrate all employment related disputes. The results were less clear in a sample of firms in financial services industries. This indicates that the effects of Gilmer on the nonunion sector in general are more ambiguous