Corporate governance level, financial robustness, and goodwill bubbles

In recent years, a significant increase in merger and acquisition activities has led to a rapid expansion of goodwill, raising concerns about the potential for goodwill bubbles and their impact on corporate financial health and capital market stability. This study examines the impact of corporate governance on goodwill bubble risk using financial data from listed firms spanning from 2010 to 2023. The findings reveal that enhanced corporate governance significantly reduces the likelihood of goodwill bubbles, although the impact varies across different industries, managerial structures, and liquidity levels. Corporate governance mitigates bubble risk by improving firms' financial soundness. However, this restraining effect is diminished in firms facing higher financing constraints. This study enriches the existing literature and provides practical insights for optimizing governance structures and preventing goodwill bubble risks, contributing to high-quality corporate development and capital market stability.