Digital transformation has a profound impact on the procedures and strategies of corporate mergers and acquisitions (M&A), yet its potential to enhance M&A quality remains uncertain. To address this, this study utilizes a sample of listed companies on the Shanghai and Shenzhen stock exchanges from 2008 to 2022, examining the influence mechanism of digital transformation on M&A goodwill bubbles. The findings indicate that corporate digital transformation significantly fosters M&A goodwill bubbles, and this conclusion holds after a series of robustness tests. Furthermore, the examination of the underlying mechanisms reveals that digital transformation induces excessive confidence among executives, driving companies to pursue premium and aggressive M&A strategies, thereby promoting goodwill bubbles. Additional analysis shows that the impact of digital transformation on M&A goodwill bubbles is more pronounced in three specific contexts: private firms, companies in growth stages, and those subjected to low-quality audits. Moreover, the short-term effects of digital transformation on goodwill bubbles obscure any potential suppressive effects. The conclusions provide significant insights for promoting corporate “intelligent transformation and digital upgrading,” enhancing governance decision-making in the digital economy era, and fostering healthy development within the capital market.