Global Depository Receipts

Global depository receipts (GDRs) are securities that represent ownership of shares in a foreign company. They are typically traded on exchanges in multiple countries, making them a convenient way for investors to buy and sell shares in foreign companies.

GDRs are issued by a bank or other financial institution that acts as a depository. The depository holds the underlying shares on behalf of the GDR holders and issues them certificates that represent the ownership of the shares.

GDRs are typically used by companies that want to list their shares on foreign exchanges. This can help them to raise capital from investors in different countries and to increase their visibility in the global market.

MCQs on global depository receipts (GDRs)

1. Which of the following is not a feature of global depository receipts (GDRs)?
   • They are traded on exchanges in multiple countries.
   • They represent ownership of shares in a foreign company.
   • They are issued by a bank or other financial institution.
   • They are a type of security.
   • Answer: They are a type of currency.
2. GDRs are typically used by companies that want to:
   • List their shares on foreign exchanges
   • Raise capital from investors in different countries
   • Increase their visibility in the global market
   • All of the above
   • Answer: All of the above
3. The depository that holds the underlying shares on behalf of the GDR holders is typically a:
   • Bank
   • Financial institution
   • Brokerage firm
   • All of the above
   • Answer: Bank
4. GDRs are typically a more expensive way to invest in foreign companies than:
   • Buying shares directly on the foreign exchange
   • Buying shares through a mutual fund or ETF
   • Both of the above
   • None of the above
   • Answer: Both of the above
5. GDRs offer some advantages over buying shares directly on the foreign exchange, such as:
   • They are more liquid
   • They are easier to trade
   • They offer more protection to investors
   • All of the above
   • Answer: All of the above

Conclusion

Global depository receipts (GDRs) are a popular way for investors to buy and sell shares in foreign companies. They offer a number of advantages over buying shares directly on the foreign exchange, such as liquidity, ease of trading, and protection for investors.

Here are some additional points about GDRs:

• GDRs are typically issued in US dollars, making them easier for investors to buy and sell.
• GDRs are subject to the regulations of the country in which they are listed.
• GDRs can be a good way to diversify your investment portfolio and to gain exposure to foreign markets.
• GDRs are not without risk, so it is important to do your research before investing.

Global depository receipts are a complex and ever-changing topic. Investors should seek the advice of a financial advisor before investing in GDRs.