Can the CSRC’s random inspection system curb corporate goodwill bubbles?

Goodwill bubbles pose a serious threat to the stable development of capital markets. This paper exploits the random inspection system implemented by the China Securities Regulatory Commission (CSRC) to construct a multi-period difference‑in‑differences model and examines the governance effect of administrative regulation on corporate goodwill bubbles. We find that the random inspection system significantly curbs the formation of goodwill bubbles, and the underlying mechanism can be explained by the fraud triangle theory. Mechanism tests indicate that the system exerts its governance role by restraining managerial self‑interest and myopia (motivation), enhancing corporate governance and external monitoring (opportunity), and curbing regulatory capture and irrational sentiment (rationalisation). Heterogeneity analysis reveals that the inhibitory effect is more pronounced in firms with weaker internal control, lower embeddedness of party organisation governance, less institutional ownership, and less analyst coverage, and is stronger in regions with higher violation rates and industries with greater uncertainty. Further analysis shows that the “look‑back” mechanism reinforces the regulatory deterrence, and the system not only squeezes out goodwill bubbles but also effectively reduces stock price crash risk and curtails management selling. This paper offers implications for optimising administrative regulation and preventing financial risks.