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CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process

Which of the following best describes the main reason a company would list its shares on a foreign exchange through a global depositary receipt (GDR) program?

The main reason is to gain access to a wider international investor base. A GDR program lets a company tap capital and liquidity in several markets. It does not eliminate currency risk for investors, and the company must still meet its home-market disclosure requirements.

  1. ATo eliminate currency risk for all investors
  2. BTo gain access to a wider international investor baseCorrect
  3. CTo avoid disclosure requirements in its home market

Explanation

GDRs let a company reach investors in several markets and improve liquidity and visibility. They do not remove currency risk, since receipts reflect the foreign currency, and the company remains subject to home-market disclosure rules.

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