It is more a rule of thumb, to allow one to tailor the size of the flask to the amount of the liquid.
Too much in the flask, and it risks bumping over. That happens when there becomes an isolated area of high heat, and there is a sudden boiling that could be too vigorous, and material floods over.
Too little liquid in the flask, and too high of a heat might be used to get the material to distill, and you risk decomposition of the material.