American Depositary Receipt - ADR

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What is an 'American Depositary Receipt - ADR'

An American depositary receipt (ADR) is a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.

BREAKING DOWN 'American Depositary Receipt - ADR'

This is an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in U.S. dollars. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. ADRs are listed on either the NYSE, AMEX or Nasdaq as well as OTC.

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RELATED FAQS
  1. How are American Depository Receipts (ADRs) exchanged?

    Learn specifics about American depositary receipts, including how they are exchanged and some of their advantages and disadvantages. Read Answer >>
  2. Why would an investor want to hold an American Depository Receipt rather than the ...

    Learn about the advantages for investors of using American Depositary Receipts instead of investing directly in the underlying ... Read Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    Understand what American depositary receipts are and how they work, including how the price of ADRs is determined by the ... Read Answer >>
  4. What are the differences between global depositary receipts (GDRs) and American depositary ...

    Discover some of the similarities and differences between global depositary receipts and American depositary receipts, and ... Read Answer >>
  5. How does a depository bank benefit from issuing an ADR for a foreign company for ...

    For domestic investors the benefits of increasing the portion of their portfolio that they invest in foreign companies is ... Read Answer >>
  6. Why would a company choose to use global depositary receipts (GDRs) for financing?

    Learn why a company might choose to utilize global depositary receipts for financing, along with the many other benefits ... Read Answer >>
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