Why Dividends Are the Same as Share Repurchases

There are two main ways in which companies can transfer their earnings to shareholders: by paying dividends, and by buying back their own shares - the so called "share repurchasing".
A company buying its own shares sounds a bit strange at first. Why would a firm that has issued some shares and sold them to investors, be interested in reacquiring these shares? After all, this has to be a zero-sum game. But it doesn't necessarily work that way.
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