This book examines how excess cash holdings affect firm and investor behavior in equity financed mergers and acquisitions. The theoretical framework for the study has been set based on research on firm capital structure and M&A outcomes. It therefore builds on a solid theoretical base, where optimality is seen as a basis for rational behavior. Equity financing has strong signaling effects, which have been reported to diminish shareholder value in the short-term especially if irrationally exercised. Reflecting on the selection of cash holdings, firms are subject to stronger signaling effects as essentially they provide a less expensive form of financing. In light of the prevailing theory, I intend to provide results that capture these effects in European context, while enabling comparison of domicile and cross-border M&A cases and the implications of different legislations.