Weak Governance Research Articles

Cultural Tension and Large- and Small-Scale Internal Conflicts

This study analyzes how cultural tensions (i.e., ethnic and religious) affect various internal conflicts (e.g., civil war to civil disorder) across different regions. The study also examines the role of governance in mitigating the effects of cultural tensions on the emergence and escalation of conflict. The comprehensive study has 136 countries from 1990 to 2021, and panels are separated by region and OECD status. The study uses two-way fixed effects with Driscoll and Kraay standard errors to account for heteroscedasticity, autocorrelation, and cross-sectional dependence. Although there are some regional variations and nuances, the results indicate cultural tensions are significant determinants of (1) the broad measure of internal conflict, (2) civil wars/coups d’état, and (3) political violence/terrorism. Therefore, one implication is that cultural tension continues to drive internal conflict. A second implication is that even in OECD countries, where institutions and governance structures are robust, cultural tensions can still significantly contribute to the emergence and risks of internal conflict. However, ethnic and religious tensions are less influential in smaller-scale conflicts, such as civil disorders, where government stability is a more important determinant. Furthermore, the study finds that government strength is vital in moderating all forms of internal conflict, indicating that even moderate cultural tensions can escalate into significant conflicts in the presence of weak governance. The study underscores the ongoing importance of addressing ethnic and religious tensions. Policy recommendations to reduce cultural tensions include (1) promoting cultural inclusiveness within societal/political dimensions, (2) promoting tolerance, (3) allowing some autonomy to cultural enclaves, and (4) actively monitoring cultural tensions and policy initiatives.

Corruption impedes good governance in Somalia’s public sector

Purpose The purpose of this paper is to understand the level of corruption in Somalia and the causes that lead to corruption that in turn hampers good governance. Design/methodology/approach The paper relies on the data collected from Somali’s public institutions, international actors, newspaper articles and peer-reviewed literature. The degree of corruption is assessed with the Corruption Perceptions Index by Transparency International and the Control of Corruption provided by the World Bank. Findings The finding shows that the level of corruption in Somalia is high and complex because of the following reasons: weak governance and poverty, culture and tradition which include favoritism based on clan membership, lack of accountability mechanism and absence political will. Measures undertaken for anti-corruption, for instance, the establishment of the National Anti-Corruption Commission and legislation for its support face barriers and challenges that include political influence, lack of capacities among the undertaking institution and lack of participation by the public. Originality/value This research adds value to the knowledge of corruption in Somalia by identifying the concrete socio-political antecedents for corruption and the problems of fighting it. This paper further presents the following detailed strategies to address corruption: enhancing the operational and financial integrity of the Independent Anti-Corruption Commission; restructuring the civil service and merging it into a merit-based system; enhancing Public Financial Management (PFM) reforms; independence of the judiciary; and sustaining development in digital technology adoption in governance and procurement.

Socio-Economic Determinants of Human Negligence in Wildfire Incidence: A Case Study from Pakistan’s Peri-Urban and Rural Areas

This study aims to examine the socio-economic determinants of human negligence in wildfire occurrences across Pakistan’s peri-urban and rural regions. Increasingly frequent and severe wildfires, driven by climate change, socio-economic conditions, and human negligence, have become a pressing issue. Rising global temperatures and changing precipitation patterns have created drier conditions, while unsafe human activities—such as improper disposal of flammable materials and unsafe agricultural burning—further escalate wildfire risks. These issues are particularly pronounced in Pakistan, where high poverty levels, limited resources, and low education contribute to dangerous behaviors. Weak governance and poor policy enforcement further exacerbate the problem. Data were collected using a cross-sectional survey from 500 participants across five regions. Multiple regression analysis revealed that higher poverty levels significantly increased negligence, whereas higher education and improved access to resources reduced it. Structural Equation Modeling (SEM) highlighted the critical roles of local governance, policy enforcement, and community engagement in mitigating wildfires. Correlation analysis indicated an inverse relationship between wildfire risk awareness and negligent behavior. Chi-square tests demonstrated a strong connection between wildfires and migration patterns, underscoring the socio-economic instability caused by these events. Finally, linear regression showed that wildfires significantly impact regional climate indicators, emphasizing the need for integrated management strategies. This study offers valuable insights into the socio-economic factors driving wildfires in Pakistan and provides guidance for developing targeted mitigation strategies.

Options trading, managerial risk-taking, and brand development

This study examines how options trading influences brand development strategies by encouraging managerial risk-taking. We find that firms with higher levels of options trading tend to introduce more new trademarks, which exhibit lower citation rates from subsequent trademarks. These firms favor brand creation over extension, leading to increased brand riskiness, as evidenced by greater trademark diversity. Potential channels for these effects include increased institutional ownership by transient investors and enhanced managerial hedging opportunities. These effects are more pronounced in firms with weaker governance, managers with higher pay-risk sensitivity, younger managerial teams, and intense competition. Additionally, we observe a negative relation between unrelated brand diversification, driven by options trading, and firm value. Our findings support the notion that active options markets incentivize managers to pursue riskier brand strategies.

Exploring the Nexus between Endogenous Development and Local Economic Development: The Experience of Tamale Metropolis in Ghana

This paper explores the relationship between Endogenous Development (ED) and Local Economic Development (LED) in the Tamale Metropolis, Ghana. ED emphasises locally driven initiatives that leverage indigenous knowledge, resources, and cultural practices, while LED focuses on promoting economic growth and sustainability through local-level collaboration. The study examines how ED practices, such as community- based agricultural activities and cooperatives, contribute to local economic growth, job creation, and social cohesion in Tamale. It also identifies key challenges, including weak governance frameworks, socio-cultural barriers, and limited access to finance, which hinder the effective integration of ED into broader LED strategies. Despite these obstacles, opportunities exist to strengthen the synergy between ED and LED through enhanced community participation, capacity building, and public- private partnerships. This paper argues that aligning ED with LED offers a sustainable development model that can address both economic and social challenges in the region. Recommendations for policymakers include improving local governance structures, fostering inclusive development policies, and creating supportive environments for community-driven initiatives. The findings highlight the need for context-sensitive development strategies that empower local communities to take ownership of their development pathways while contributing to sustainable economic growth.

Regulation of health professions education and the growth of schools in Somalia.

Health professions education, encompassing training programs for medicine and surgery, nursing, midwifery, medical laboratory sciences,, and public health, along with their regulations, are pivotal to achieving universal health coverage and Sustainable Development Goals, contributing significantly to health outcomes and public trust in the healthcare workforce. However, low- and middle-income countries, especially in sub-Saharan Africa, face challenges, such as inadequate resources, outdated curricula, and weak governance. Somalia in particular grapples with a fragmented health system and a critical shortage of skilled health professionals, exacerbated by decades of civil war and political instability. This study employed a mixed-method approach that incorporated both qualitative and quantitative data collection and analysis. A comprehensive literature review was conducted along with semi-structured interviews with 44 key informants, including representatives from professional health schools and officials from the Ministry of Health. Additionally, five focus group discussions were held with young professionals and an online survey was administered to students enrolled in professional health courses. The data analysis employed descriptive for quantitative data, and thematic analysis for qualitative data, guided by the human resources for health (HRH) maturity model framework. This study identified 112 health professions schools across Somalia, with a significant concentration in urban areas, particularly in Benadir. The health workforce analysis revealed a pronounced urban-rural disparity and a density of health professionals below the WHO's recommended threshold. The focus group discussions and surveys highlighted the employment challenges faced by young physicians and students' perceptions of their training and future employment opportunities. The proliferation of health professions schools without adequate quality control, the critical shortage and maldistribution of skilled health professionals, and the absence of a comprehensive regulatory framework are significant challenges facing Somalia's healthcare system. The establishment of the National Health Professionals' Council (NHPC) Act in 2020 marks a step towards addressing these issues. This study emphasizes the need for accreditation of health professions schools, capacity building of HRH teams, and collaboration among stakeholders to improve healthcare workforce development and regulation. Addressing urban-rural disparities and combating professional misconduct are also crucial for achieving universal health coverage and improving health outcomes in Somalia.

The Law or the Career? Autocratic Judiciaries, Strategic Sentencing, and Political Repression

Why do judges sometimes act against autocrats’ will, even without judicial independence and tenure security? Contrary to the theory of strategic defection under weak governments, we argue that this behavior can also emerge under strong governments with lax monitoring. When autocrats primarily monitor severe political cases, judges can strategically downplay case severity to avoid oversight, thereby increasing judicial autonomy and the rule of law. Yet, these adjustments will be carefully calibrated–sufficient to evade scrutiny but not too drastic to trigger autocrats’ suspicions and incur sanctions against judges. We test this expectation with new data on Taiwan’s military trials during authoritarian rule, finding that judges tend not to issue sentences above a review threshold after its introduction. Sentence reductions are mostly moderate, affecting cases where sentences can fall slightly above or below the threshold under judges’ discretion. These findings have implications for understanding state repression and judicial agency in nondemocracies.

Mega corruptions in mega projects: Debating the dynamics of dam construction in Ethiopia

Background This study critically examines the dynamics of corruption within Ethiopia’s dam construction projects, focusing on the Grand Ethiopian Renaissance Dam (GERD the Gilgel Gibe series, and Genale Dawa. The research highlights how weak management practices, insufficient oversight, and centralized decision-making, resulting in contribute to inflated costs, project delays, and compromised construction quality. A comprehensive understanding of these issues is crucial for addressing the challenges that impede Ethiopia’s infrastructure development. Methods A qualitative research approach was employed, integrating both primary and secondary data sources. The study utilized four theoretical frameworks—Principal-Agent Theory, Rent-Seeking Theory, Institutional Theory, and Neo-Patrimonialism—to analyze the structural and behavioral factors enabling corruption in Ethiopia’s dam construction projects. Results The study found that corruption is largely driven by weak management practices, insufficient oversight, and centralized decision-making. These factors contribute to inflated project costs, significant delays, and compromised construction quality. The lack of transparency and inadequate monitoring exacerbate these issues, leading to inefficient resource use and undermining the projects’ intended benefits. Economic impacts include increased public debt and strained financial resources. Socially, corruption erodes public trust and adversely affects the communities involved. The findings also highlight how information asymmetry and misaligned incentives contribute to corruption, with weak governance structures and informal networks further exacerbating the problem. These issues lead to cost overruns, increased debt, and diminished public confidence, which negatively impacts development outcomes. Conclusions While corruption in Ethiopia’s dam construction projects poses significant challenges, it is not insurmountable. Strengthening legal and regulatory frameworks, enhancing institutional capacity, promoting community participation, and leveraging international cooperation are crucial for mitigating these risks. Recommendations include implementing e-procurement systems, establishing independent oversight bodies, and promoting transparency to ensure these mega projects achieve their intended economic and social benefits.

A Comprehensive Review of the Occurrence, Distribution, Characteristics and Fate of Per- and Polyfluoroalkyl Substances in the African Continent

AbstractPer- and polyfluoroalkyl substances (PFAS) represent synthetic organic compounds extensively utilized in a variety of domestic and industrial products due to their distinctive characteristics. Designated as persistent organic pollutants (POPs) by the Stockholm Convention, PFAS are recognized for their long-lasting presence, widespread prevalence, and adverse impacts on both the environment and human health. Recently, the United States Environmental Protection Agency (US EPA) revised the guideline limits for perfluorooctane sulfonic acid (PFOS) and perfluorooctanoic acid (PFOA) in drinking water, setting them at 0.02 and 0.004 ng/L, respectively. Despite the global emphasis on the necessity for monitoring and treating PFAS in environmental media, there is a scarcity of information on PFAS studies in Africa. This gap may be attributed to a lack of modern laboratory facilities, weak governance, and the enforcement of environmental regulations. This study comprehensively reviews PFAS, focusing on key areas such as global guidelines and regulations, sources and distribution in the environmental matrix in Africa, characteristics, environmental fate, reported methods for sampling and analysis in Africa, and the role of government in the National Implementation Plan (NIP) on the continent. Additionally, the study offers recommendations and identifies knowledge gaps. In Africa, PFAS have been detected in various environmental compartments, including drinking water ranging from 0.03 to 200 ng/L, surface water ranging from 0.0254 to 788 ng/L, sediment ranging from 0.50 to 248.14 ng/g, wastewater ranging from 0.9 to 507 ± 257.6 ng/L, seafood ranging from 0.12 to 179.2 ng/g, sludge ranging from 0.01 to 0.098 ng/g, plants ranging from 0.160 to 29.33 ng/g, and indoor dust ranging from 1.3 to 69 ng/g. Notably, perfluorooctane sulfonic acid (PFOS) and perfluorooctanoic acid (PFOA) are prevalent in samples from various environmental matrices across Africa. Reported sources of PFAS in African countries include municipal waste, hospital waste from medical equipment, discharge from industries, and wastewater treatment plants. Urgent attention is required from decision-makers and researchers in Africa to address PFAS monitoring, regulation, and treatment within the continent. Graphical abstract

Does local government debt pressure hamper green transition? Evidence from China

The accumulated local government debt will change government fiscal behavior, which will further impact regional environment performance to a certain extent. However, the literature on how local government debt pressure (LGDP) affect green transition is scarce. By measuring the green transition by green total factor productivity (GTFP), we analyze the effect of LGDP on GTFP. We find that LGDP significantly reduces the GTFP. The negative effect acts through reducing green innovation and loosing environmental regulation. In addition, the negative impact will be more pronounced in cities with weak governance, development, and environmental protection efforts. Finally, enhancing marketization, lowering GDP growth target, and reducing tax burdens can alleviate the adverse effect of LGDP on GTFP. The conclusions of this study provide theoretical support for appropriate government debt governance and have important practical significance for green sustainable development in developing countries.

Towards Environmental Sustainability: Integrating RS and GIS for Ecology Assessment

The environment provides numerous benefits for human well-being, such as ecosystem services. These services directly and indirectly depend on the physical state of the ecosystem. However, the over-exploitation of natural resources along with socio-economic factors, i.e. economic growth, poverty, agriculture expansion, population growth and weak environmental governance and regulation for fulfilling the human needs for food, fuel, and shelter, is leading to the degradation of the ecological health of an area. Therefore, monitoring and assessment of spatial and temporal changes in the ecology of a region in terms of vital ecological services is very critical and would help the decision-makers to develop and plan appropriate adaptation and mitigation measures for the conservation of natural ecosystems at various scales to ensure environmental sustainability. The present study aimed to assess the ecological status of the Mahi Bajaj Sagar catchment area in Rajasthan (India) from the year 2000 to 2020, using remote sensing-based indices. Indicators such as greenness, dryness, and heat index have been selected as per the pressure-state-response (PSR) framework. Multi-spectral remote sensing data and image processing methods have been used to estimate these indicators, and a remote sensing-based Ecological Status Index (RSBI) has been generated by their integration using the principal component analysis (PCA) to assess the ecological status of the Mahi Bajaj Sagar catchment. Findings from the study indicate a consistent decline in the overall ecological status of the Mahi Bajaj catchment, where decreased forest areas have a pronounced effect on ecological health. Interestingly, approximately 43.6% of the area displayed resilience to changes in ecological status; however, 36.4% of the area exhibited signs of ecological degradation. Our study underscores the efficacy of a remote sensing-based approach in quantifying and detecting ecological changes, offering a promising methodology for monitoring and assessing the ecological health of large areas that can help promote environmental sustainability. Keywords: Environmental Sustainability, Ecological Status, RSBI, Remote Sensing, PSR Framework

Board Independence And Financial Distress: Insights From India

Resource Dependency Theory (RDT) posits that organizations depend on external resources to navigate uncertainty and sustain growth, with independent directors in corporate governance acting as key intermediaries, providing expertise, external networks, and strategic oversight. This study employs Panel [Random Effect (RE)] regression to analyze the impact of independent directors on the financial distress likelihood of 20 manufacturing companies listed on the NSE over the period 2019–2024. The findings reveal that firms with a higher number of independent directors exhibit a significantly higher risk of financial distress, reinforcing the notion that these directors aggravate financial vulnerabilities and enhance organizational instability. Background: Corporate frauds like the Satyam and Nirav Modi-PNB scandals highlight the severe consequences of deceptive practices, undermining financial markets and stakeholder trust. These incidents exposed vulnerabilities in governance and risk management, prompting regulatory reforms in India. Weak corporate governance facilitates fraud by allowing insufficient oversight and accountability. Recent reforms under the Companies Act, 2013, and SEBI's regulations aim to enhance transparency and reduce fraud risks. Strong corporate governance would be critical for financial stability, investor confidence, and achieving the "2047 Viksit Bharat" vision. Research explores how independent directors influence the likelihood of financial distress. Materials and Methods: This study investigates financial distress in manufacturing firms listed on the National Stock Exchange (NSE) through a panel data methodology. A random sample of 20 firms was selected to ensure representativeness, covering the period from 2019 to 2024, with banks and financial institutions excluded due to their distinct financial characteristics. Financial distress was assessed using the Altman Z-score, a widely recognized metric for evaluating financial distress. The independent variable in the study is Board Independence, i.e., the total number of independent directors on the Board. The control variables include Profitability, Leverage, and Activity. Panel data estimation techniques were used to address issues of endogeneity and heteroscedasticity. The Hausman test was conducted to determine whether to retain fixed or random effects for the analysis. Results: The Hausman test showed a p-value of 0.0.78 (greater than 0.05) which revealed that that random effect model is appropriate for the analysis. The analysis reveals a negative relationship between board independence and financial distress, indicating that an increase in the number of independent directors is associated with a higher likelihood of financial distress at 5% level of significance. Leverage significantly increases the likelihood of financial distress, while increased operational activity decreases it; Net Profit Margin is statistically insignificant. Conclusion: This finding challenges the conventional understanding of board independence, which is generally seen as a mechanism to enhance corporate governance by providing unbiased oversight, strategic guidance, and external resources

Assessment of the Shortcomings on Fight Against Corruption

The purpose of the study is to evaluate the extent of corruption in the South African environment. The systematic organization of scholarly sources and methods for combating corruption shows that because it jeopardizes the integrity of a respectable government, corruption generally opposes accountability and the rule of law. Anti-corruption initiatives in the nation are still hampered by several issues, notwithstanding efforts to eradicate corruption. The article explores explicitly that there are various factors causing corruption to exist despite all measures. These factors are political interference, resource constraints, lack of accountability, complex bureaucracy, nepotism and patronage, inadequate legal framework, cultural factors, economic factors, and global factors. Investigation in the paper is conducted in the following logical sequence: contextual framework of corruption in the country is explained during various timeframes, and after that, a theoretical framework is discussed. The research methodology is stated that is applied to gather information for this article. The methodology used is qualitative and a comprehensive literature review was conducted to collect information. The study made use of various journal articles, books, legislative frameworks, and official records of the Auditor-General and Public Service Commission to obtain relevant information. The data was assessed through documents and conceptual analysis. The findings indicate that, despite anti-corruption laws, policies, and organizations, South Africa still confronts a variety of significant obstacles to corruption. Political leaders who use their connections to further their own interests may be the ones to foster an environment of unethical governance, which makes weak governance one of the most annoying obstacles of all. The article’s conclusion suggests that reducing corruption requires a strong emphasis on social accountability, public engagement, and citizen participation. These are excellent strategies, but sometimes they are not implemented or applied consistently. To reduce corruption, it is advised to inculcate moral principles at all governmental and governed levels to ensure reciprocal accountability.

Unraveling the Threads : Weak Governance, Corruption and Disaster Risk in Nepal

Unraveling the Threads : Weak Governance, Corruption and Disaster Risk in Nepal

A dynamic evolutionary game to discourage enterprise “greenwashing”

To meet the increasing consumer demand for green products and services, governments have increased their regulation of enterprise production behaviors so that enterprises may choose “greenwashing” to obtain the premium of green products at the lowest cost under government regulation. The increase of greenwashing hinders green innovation by enterprises. To quantify this problem and seek solutions to promote enterprises cleaner production and sustainable development, we established a tripartite evolutionary game model for enterprises, consumers, and governments. Using the model, we analyzed the stability of their strategy combinations through simulations and explored the impact of some parameters on the strategy selection. We found that (1) the combination of enterprises adopting true green, consumers buying green products, and weak government regulation was the most environmentally friendly and low-cost strategy solution in the tripartite game system. (2) An increase in government penalties or subsidies to enterprises, as well as a reduction of the extra cost of producing green products, can improve the probability that enterprises will adopt cleaner production. Based on the results, the government should define reasonable subsidies and penalties, guide enterprises to assume their social responsibility, and stimulate consumer green demand. Enterprises should improve their moral qualities, actively engage in green innovation, and increase investment in green product research to guide the game system towards the ideal state.

Socio-political factors in the emergence of border armed conflicts in Central Asia

This article examines the socio-political causes of border disputes and armed conflicts between states in Central Asia. Socio-political causes of border disputes in Central Asia encompass ethnic tensions, resource allocation conflicts, geopolitical influences, weak governance, cross-border community ties, and strategic national security interests. The article assesses the importance of Central Asia in the world political system and describes interactions between the states of the Central Asian region in the context of the settlement of territorial disputes at the present stage.

CEO turnovers as organizational responses to shocks in competition

This paper provides novel evidence of organizational responses in the form of CEO turnover to competition shocks induced by unexpected tariff cuts. We find that the likelihood of CEO turnover increases with unexpected surge in industry competitiveness, and this result is mainly driven by non-exporting firms. Among non-exporting firms, the higher likelihood of CEO turnover is confined to firms with weak governance, high leverage, and in financial distress. Exporting firms, on the other hand, experience increased exports and show no significant CEO turnover changes.

The Main Security Challenges and Threats in the Western Balkans and Possible Model for Solving Them in the Process of European Integration

In a narrower sense, within the geo-political jargon of the European Union, the term “Western Balkans” is used alongside the term “Southeast Europe”. The Western Balkans encompasses the former Yugoslav countries of Serbia, Montenegro, Croatia, Bosnia and Herzegovina, North Macedonia, and Kosovo, excluding Slovenia but including Albania. After the dissolution of the former Yugoslavia, objective reasons emerged that prompted the need for new forms of cooperation between the new and existing countries in order to promote reconciliation and stabilise the Western Balkans. NATO and the EU played a predominant role in this process, along with certain Member States of these international organisations. The aggression by Russia against Ukraine on 24th February 2022, the situation in the Middle East, and the complexity of relations between China and the United States regarding Taiwan have compelled all European countries to recognise that these conflicts pose an immediate threat to European security. Analysing the foreign policy aspects and their impact on regional security, it is essential to highlight that the Western Balkans is characterised by weak governance, a fragile civil society, and geopolitical disputes. These internal and regional factors make the region highly susceptible to local and external disinformation campaigns. On the other hand, China represents a significant global partner for Serbia, and it is important to point out that since 2016, investments from China have been accelerating and also that in the period from 2016 to 2023, about 96% of the total investments were made, a total of 5.3 billion euros, and that in each of those years, China was among the five most important investors in Serbia (Politika, 7th May 2024). As the most influential state economically and politically in the Western Balkans, Serbia has the potential to influence other countries in the region toward alternative centres of power. The latest NATO Strategic Concept, adopted in Madrid in 2022, emphasises the strategic importance of the Western Balkans and the Black Sea region for the Alliance, and NATO has expressed its readiness to continue supporting the Euro-Atlantic aspirations of interested countries in these regions. The Berlin Process (BP) is an intergovernmental initiative aimed at connecting the Western Balkan countries (WB6) with the European Union and facilitating the development of mutual relations based on European values. The focus of the process lies in high-level cooperation between WB6 officials and their EU partners. It also involves EU institutions, international financial institutions, civil society, youth, and businesses in the region. One of the significant advantages of the Berlin Process is the financing of planned and assumed commitments from EU funds, unlike most other initiatives where states finance their participation from their own budgets.

Contemporary Issues and Challenges of Institutional Finance in Bihar: An In-depth Study

It has been observed that the Public sector banks in Bihar are prominent in institutional credit and deposits. They play a vital role for expansion of the economic activities and filling the credit gaps. The number of customers visiting the banks has come down due to the use of technology in their functioning. Wide spread use of debit cards, credit cards, ATM cards, UPI transactions, services of CSPs, internet and mobile banking services has changed the banking habits of the customers. The network of banks through Grahak Seva Kendras or Customer Service Points is expanding rapidly. Public sector banks lead in deposits and advances in comparison to the private banks, cooperative banks and other small finance banks. Commercial banks have twice non-performing assets vis- a- vis the regional rural banks. The state has enormous constraints due to the prevalence of weak governance, lack of infrastructure, complex social stratification, persistent poverty, etc. High dependence on public sector banks, credit gaps, credible underwriting digital innovations and high non-performing assets are the major challenges before the institutional finances in Bihar.

Contingent cash crunch: How do performance commitments affect acquirer liquidity?

This paper investigates how performance commitment clauses in mergers and acquisitions (M&As) influence the corporate liquidity of acquiring firms. Using a comprehensive dataset of Chinese domestic M&A deals from 2008 to 2021, we find that acquisitions involving performance commitments correspond to lower corporate liquidity for acquirers in subsequent years. Difference-in-differences analysis, instrumental variables, and propensity score matching support a causal relationship. Furthermore, cross-sectional tests reveal that this negative association is amplified for nonstate ownership, weak governance, poor reporting quality, and low financial constraints. We find that performance commitments increase management optimism, providing insights into the mechanisms linking contingent deal structures with suboptimal liquidity policies and heightened financial distress. Our study suggests that the contingent contract structures in M&A deals drain corporate liquidity, leaving firms financially vulnerable.