Stock repurchases are used as a tax efficient method to put cash into shareholders' hands, rather than paying dividends, in jurisdictions that treat capital gains more favorably.
In an efficient market, a company buying back its stock should have no effect on its price per share valuation.
Finally, if the sellers into a corporate buyback are actually the call option holders themselves, they may directly benefit from temporary unrealistically favorable pricing.
On the balance sheet, treasury stock is listed under shareholders' equity as a negative number.
In this method, the paid-in capital account is reduced in the balance sheet when the treasury stock is bought.
In the par value method, when the stock is purchased back from the market, the books will reflect the action as a retirement of the shares.
In auditing financial statements, it is a common practice to check for this error to detect possible attempts to "cook the books".
In the United States, buybacks are covered by multiple laws under the auspices of the Securities and Exchange Commission.