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Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

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15.5 INTERNATIONAL SECURITIES

15.5.1 International Equities

When companies need foreign exchange, they issue international equities and international bonds. While issuing international equity, the company does its basic homework and gets approval from the regulatory authorities. It deposits the shares to be issued with the custodian bank located in the domestic country. The custodian bank is appointed by the depository in consultation with the share-issuing company.

The custodian bank asks the depository located in a foreign country to issue depository receipts in lieu of the shares held. The ratio between the number of shares and the number of depository receipts is decided well before the actual issue. In fact, the fixing of the issue price ...

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