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
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    Learn about the advantages for investors of using American Depositary Receipts instead of investing directly in the underlying ... Read Answer >>
  2. Why are big foreign companies considering delisting their American depositary receipts?

    American depositary receipts (ADRs) were developed to give investors an easier way to invest in foreign companies. An ADR ... Read Answer >>
  3. What parties are involved in the creation of an American depositary receipt?

    An American depositary receipt (ADR) is a legal certificate issued by a recognized U.S. bank that represents a specific number ... Read Answer >>
  4. What factors must a company consider before establishing an American Depository Receipt ...

    Learn which factors a foreign company must consider before establishing an American Depository Receipt, or ADR, program in ... Read Answer >>
  5. Is there a difference between ADR and ADS?

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  6. What are the differences between Levels I, II, and III American Depository Receipts ...

    Understand the difference between sponsored American depositary receipts categorized within Level I, II or III. Read Answer >>
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