ADRs/GDRs have declined as a fund-raising option, following regulatory fears. But they defray risk for domestic, global investors
A popular path to globalisation of equities in many emerging market economies has been through issuing of depository receipts (DRs), which are essentially negotiable certificates representing shares in a foreign company. These DRs are traded on a local stock exchange of mostly advanced economies and are issued typically by a bank.
DRs act both as a signal as well as a source of funding for a corporate in an emerging market economy. Since the listing requirements in the bourse of an advanced country are often more involved, listing in an advanced economy’s stock exchange would give certain positive signals about the quality of management of the domestic corporate.
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Source: The Hindu BusinessLine