Too tight of squish (this will depend on your setup and fuel) will lead to detonation. Too loose of squish will leave power on the table, but won't harm the engine. Squish won't affect your compression, but compression ratio will affect your squish velocity and both of these factors need to be taken into account to determine fuel requirements for your engine. Also squish angle, divergent (squish clearance gets wider toward the center of the bore) is optimal on most engines. Convergent (squish clearance gets tighter toward center of bore) is never a good situation.
-Brandon