Specifically, we regress earnings on returns separately for good news and bad news firm-year observations, with observations classified as bad news if returns are negative and good news otherwise. The regression specification includes an indicator variable for the period after the merger (Post-Merger), and interactions between Post-Merger and Returns for both good and bad news firm-years. The coefficient of interest is that on the interaction Post-Merger*Return*NegRet. Empirical Results Table 6 presents the results of our TLR analyses, comparing TLR of earnings between the pre-merger and post-merger periods for the segment and non-segment firms, and between the high-/low-compliance segment firms and non-segment firms. We use Compl4 to partition the segment firms because the results in table 5 suggests that quarterly reporting has a different effect on liquidity from the other four dimensions of compliance in the post-merger period. Specifically, we refer to segment firms with Compl4=1 as and firms with Compl4=0 as “high-compliance firms” The results in table 6 show that TLR, measured as the coefficient on the interaction firms.” Post-Merger*Return*NegRet from Eq. (2), is marginally significant for the non-segment firms (column (1)) and highly significant for the segment firms (column (2)), indicating that bad news is incorporated more quickly into earnings after the merger than before. To the extent that timely loss recognition is a reasonable proxy for quality of earnings, this result is consistent with an increase in earnings quality after the merger for all Euronext-listed firms. The coefficient estimate for the segment firms is more than twice that for the non-segment firms, although the difference is not significant at conventional levels (column (3) with p-value=1.35). Columns (4) through (6) compare TLR for the non-segment firms with TLR for the low-compliance segment firms, and show that the coefficient on the interaction Post-Merger*Return*NegRet is not significant at conventional levels for the low-compliance segment firms, nor is the difference in TLR between the non-segment and low-compliance segment firms. Columns (7) through (9) compare TLR
Specifically, we regress earnings on returns separately for good news and bad news firm-year observations, with observations classified as bad news if returns are negative and good news otherwise. The regression specification includes an indicator variable for the period after the merger (Post-Merger), and interactions between Post-Merger and Returns for both good and bad news firm-years. The coefficient of interest is that on the interaction Post-Merger*Return*NegRet. Empirical Results Table 6 presents the results of our TLR analyses, comparing TLR of earnings between the pre-merger and post-merger periods for the segment and non-segment firms, and between the high-/low-compliance segment firms and non-segment firms. We use Compl4 to partition the segment firms because the results in table 5 suggests that quarterly reporting has a different effect on liquidity from the other four dimensions of compliance in the post-merger period. Specifically, we refer to segment firms with Compl4=1 as “high-compliance firms” and firms with Compl4=0 as firms.” The results in table 6 show that TLR, measured as the coefficient on the interaction Post-Merger*Return*NegRet from Eq. (2), is marginally significant for the non-segment firms (column (1)) and highly significant for the segment firms (column (2)), indicating that bad news is incorporated more quickly into earnings after the merger than before. To the extent that timely loss recognition is a reasonable proxy for quality of earnings, this result is consistent with an increase in earnings quality after the merger for all Euronext-listed firms. The coefficient estimate for the segment firms is more than twice that for the non-segment firms, although the difference is not significant at conventional levels (column (3) with p-value=1.35). Columns (4) through (6) compare TLR for the non-segment firms with TLR for the low-compliance segment firms, and show that the coefficient on the interaction Post-Merger*Return*NegRet is not significant at conventional levels for the low-compliance segment firms, nor is the difference in TLR between the non-segment and low-compliance segment firms. Columns (7) through (9) compare TLR