Difference between ADR and GDR

What is ADR?

ADR stands for American Depository Receipts, which are a kind of negotiable security instrument that is issued by a US Bank representing a specific number of shares in a foreign company that trades in US financial markets.

ADRs make it easy for US investors to purchase stock in foreign companies.

What is GDR?

GDR stands for Global Depositary receipts. It is a type of bank certificate that acts as shares in foreign companies. It is a mechanism by which a company can raise equity from the international market.

GDR is issued by a depository bank located overseas or in other words, GDR is issued by a depository bank which is located outside the domestic boundaries of the company to the residents of that country.

GDR is mostly traded in the European Market. Issuing GDR is one of the best ways to raise equity from overseas.

Example of GDR

A company located in India, looking to get stock listed on the French Stock Exchange, will get into an agreement with a depository bank of France, which in turn will issue shares to the residents of France after getting permission from the company’s domestic custodian.

Following are some of the points of difference between ADR and GDR

ADR

GDR

Stands For

American Depository Receipts

Global Depository Receipts

Definition

American Depository Receipts (ADR) is a type of negotiable security instrument that is issued by a US bank on behalf of a non-US company, which is trading on the US stock exchange.

Global Depository Receipts (GDR) are a type of negotiable instruments that are issued by a foreign depository bank for trading of shares of a company in an international market

Currency traded in

US Dollars

US Dollars, Euro

Purpose

To acquire resources in the US Market

To acquire resources in the International Market

Listed in

NASDAQ

Listed in Non-US stock exchanges such as LSE (London Stock Exchange) and Euronext (France)

Issued By

US Capital Market

European Capital Market

This concludes the topic on the difference between ADR and GDR. It serves as an important concept of Business Studies for Commerce Students. For more such interesting topics, stay tuned to BYJU’S.

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