Question : The primary objective of issuing GDRs or ADRs is to:
Option 1: Increase domestic market share
Option 2: Attract foreign investment
Option 3: Reduce taxation burden
Option 4: Increase employee participation
Correct Answer:
Attract foreign investment
Solution : The correct answer is (b) Attract foreign investment
The primary objective of issuing GDRs (Global Depository Receipts) or ADRs (American Depository Receipts) is to attract foreign investment. By issuing these depository receipts, companies can tap into international capital markets and attract investors from different countries. GDRs and ADRs enable companies to expand their investor base beyond their domestic market and raise capital from foreign investors. This can provide the company with access to a larger pool of capital, diversify its shareholder base, and potentially increase its visibility and credibility in global markets.
The issuance of GDRs or ADRs allows companies to tap into the liquidity and investment opportunities available in international markets, facilitating foreign investment in the company's shares without requiring direct access to foreign exchanges or compliance with local regulatory requirements.
