19 February 2024
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 of a foreign company’s stock.
ADRs are designed to make it easier for U.S. investors to invest in foreign companies without having to deal with the complexities of purchasing shares directly on international stock exchanges.
ADRs are denominated in U.S. dollars and trade on U.S. stock exchanges, just like regular stocks.
American Depositary Receipt (ADR) Types
Types of ADRs:
- Sponsored ADRs: These are issued with the cooperation of the foreign company, which means the company assists with administrative tasks, such as reporting requirements, to maintain compliance with U.S. regulations.
- Unsponsored ADRs: These are issued without the involvement or cooperation of the foreign company. They are usually created by a U.S. depository bank due to investor demand. Unsponsored ADRs tend to have less direct company involvement and may have fewer reporting requirements
American Depositary Receipt (ADR) Examples
Examples of ADRs:
- Toyota Motor Corporation (TM): Represents shares of the Japanese automaker Toyota and trades on the New York Stock Exchange (NYSE).
- Nestlé S.A. (NSRGF): Represents shares of the Swiss food and beverage company Nestlé and trades over-the-counter (OTC) in the U.S.
American Depositary Receipt (ADR) Meaning
An American Depositary Receipt (ADR) is a financial instrument that allows U.S. investors to indirectly invest in foreign companies by purchasing shares of the foreign company’s stock through a U.S. bank.
American Depositary Receipt (ADR) Meaning in english, hindi, urdu, tamil, kannada, marathi, bengali:
English: American Depositary Receipt (ADR)
Hindi: अमेरिकी जमा प्रमाणपत्र (एडीआर)
Urdu: امریکی جمع پروانہ (ای ڈی آر)
Tamil: அமெரிக்க வரைபடக் கைது (ஏடிஆர்)
Kannada: ಅಮೆರಿಕದ ಜಮಾ ಪರಿಶಿಷ್ಟ (ಏಡಿಆರ್)
Marathi: अमेरिकन जमा प्रमाणपत्र (एडीआर)
Bengali: আমেরিকান আমানত রশিদ (এডিআর)
Please note that the translations are based on the literal meaning of “American Depositary Receipt (ADR)” and might not fully capture the financial context or nuances of the term in each language.
American Depositary Receipt (ADR) Synonyms
Synonyms:
- ADR.
- American Depository Receipt.
- American Depositary Share.
- American Depository Certificate.
American Depositary Receipt (ADR) Antonyms
There are no direct antonyms for ADRs, but you could consider terms related to traditional investment in domestic companies.
American Depositary Receipt (ADR) Definition
An American Depositary Receipt (ADR) is a negotiable financial instrument issued by a U.S. bank, representing a specific number of shares of a foreign company’s stock.
ADRs are designed to facilitate the investment of U.S. investors in foreign companies without the need to directly purchase shares on international stock exchanges.
ADRs are denominated in U.S. dollars and trade on U.S. stock exchanges, allowing investors to gain exposure to foreign companies’ performance and potentially benefit from international investment opportunities.
ADRs also simplify the process of receiving dividends and participating in corporate actions for foreign companies, making them more accessible to a wider range of investors
American Depositary Receipt (ADR) FAQ
Are ADRs only available for large foreign companies?
No, ADRs can be issued for companies of various sizes, including smaller ones. However, larger foreign companies are more likely to have ADRs due to higher investor demand.
How do ADR dividends work?
Dividends paid by the foreign company to the U.S. depository bank are passed on to ADR holders in U.S. dollars after deducting any fees or expenses.
Can ADRs be traded like regular stocks?
Yes, ADRs can be bought and sold on U.S. stock exchanges during trading hours, just like regular stocks.
ADR holders typically have the right to receive dividends and participate in company actions like stock splits and mergers, but voting rights might be limited.
How are ADR prices determined?
ADR prices are influenced by the performance of the foreign company’s stock on its home exchange, as well as currency exchange rates.