What benefit might a firm gain from conducting stock repurchases?

A firm conducting stock repurchases achieves a significant benefit by reducing the number of outstanding shares in the market. When a company buys back its own shares, it effectively decreases the supply of its stock. This reduction often leads to an increase in earnings per share (EPS), as the same amount of earnings is now distributed over fewer shares. Consequently, this can enhance shareholder value, as improved EPS may lead to a higher stock price, benefiting existing shareholders.

Furthermore, with fewer shares on the market, the company may also experience increased control over its equity structure. This can be particularly beneficial if the firm seeks to consolidate ownership or enhance its financial metrics. Overall, the decision to repurchase shares directly impacts the outstanding share count, which is a fundamental reason why many companies opt for this strategy, especially when they believe their stock is undervalued.