Question : GDRs and ADRs are used to:
Option 1: Raise capital in foreign markets
Option 2: Issue bonus shares to existing shareholders
Option 3: Pay dividends to shareholders
Option 4: Buy back shares from the market
Correct Answer:
Raise capital in foreign markets
Solution : The correct answer is (a) Raise capital in foreign markets
GDRs (Global Depository Receipts) and ADRs (American Depository Receipts) are both financial instruments used to raise capital in foreign markets. They enable companies to access international investors and expand their investor base beyond their home country. GDRs are issued by depository banks outside the company's home country and are listed and traded on international stock exchanges. They represent ownership in shares of foreign companies and allow companies to raise capital from investors in different countries.
ADRs are specifically used to raise capital in the United States. They are issued by a U.S. depository bank and represent shares of non-U.S. companies. ADRs enable foreign companies to access the U.S. capital markets and attract American investors.
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