| American Depositary Receipt (ADR) The physical certificate for an American Depositary Share. American Depositary Shares trade electronically, but only American Depositary Receipts can be delivered to an investor. American Depositary Shares and their companion American Depositary Receipts always exchange on a one-for-one basis. Although American Depositary Receipts and American Depositary Shares are different, the terms are frequently used interchangeably. See also sponsored American Depositary Receipt, unsponsored American Depositary Receipt. Stocks of some, especially large, foreign companies traded in the U.S. markets are traded as American Depositary Receipts (ADRs). ADRs are receipts for the shares of a foreign corporation held by a U.S. depositary bank. The receipts are traded openly on the U.S. markets, and the owner (shareholder) is entitled to all dividends and capital gains. Each ADR represents a determined ratio of the foreign stock, and the price of the ADR corresponds to the price of the stock in the home market adjusted for this ratio. ADRs traded in the U.S. markets will clear and settle in U.S. dollars. The depositary bank will also convert, for a small fee, any dividends to U.S. dollars. Thomas M. Tarnowski, Senior Business Analyst, Global Investment Banking Division, Citigroup, Inc. Salomon Smith Barney, New York, NY, and London, UK |
American depositary receipt (ADR). Shares of hundreds of major overseas-based companies, including names such as British Petroleum, Sony, and Toyota, are traded as ADRs on US stock markets in US dollars.
ADRs are actually receipts issued by US banks that hold actual shares of the companies' stocks. They let you diversify into international markets without having to purchase shares on overseas exchanges or through mutual funds.
What Does American Depositary Receipt (ADR) Mean?
A negotiable certificate issued by a U.S. bank representing a specified number of shares 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 reduce administrative and duty costs that otherwise would be levied on each transaction.
Investopedia explains American Depositary Receipt (ADR)
ADRs are an excellent way to buy shares in a foreign company and realize 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 a foreign currency would be converted to U.S. dollars, net of any conversion expenses and foreign taxes. ADRs are listed on the NYSE, AMEX, or Nasdaq.
Related Terms:
• Derivative
• Global Depositary Receipt—GDR
• MSCI—Emerging Markets Index
• Security
• Spiders—SPDRs
How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content.
| ?Page tools | ||
|---|---|---|
|