A global depositary receipt (GDR) is a bank certificate issued in multiple countries for shares in a foreign company. The shares of a GDR trade as domestic shares. They are offered for sale globally through various banks. A GDR a financial tool that is used by private markets to raise capital that is denominated in either American dollars or euros. They are called European depository receipts when private markets are trying to get euros.
American Depositary Receipts
GDRs are similar to American depositary receipts (ADRs). The main difference is that ADRs are issued only by U.S. banks for foreign stocks that are traded on a U.S. exchange. The underlying security of the ADRs is held by an American financial institution overseas rather than by a global institution. ADRs help reduce the administration and duty costs that would otherwise be levied on each transaction. They are a great way to buy shares in a foreign company while obtaining any dividends and capital gains in American dollars.
ADRss do not reduce or get rid of the currency and economic risks for the underlying shares in another country, however. Dividend payments in euros are converted to American dollars, net of conversion expenses and foreign taxes. This is done in accordance with the deposit agreement. ADRs are listed on various stock exchanges , such as the New York Stock Exchange, the American Stock Exchange and Nasdaq, as well as trading over the counter.