What is the Full form of ADR?
The full form of ADR is an American depositary receipt.ADR is a negotiable document issued by a U.S. depositary bank that often represents one proportion of a foreign firm’s stock by a defined number of shares. The ADR trades on exchanges of US shares much like any domestic stock.
ADR’s are providing a way for U.S. investors to buy shares in foreign enterprises that would not have been eligible. International companies often benefit, as ADR’s allow them to draw American buyers and capital without any of the difficulty and cost of listing on U.S. Stock exchange market.
How does American depositary receipt work?
- ADR’s are shares of an international firm held and issued by a US Bank.
- The U.S. banks purchase shares of a foreign corporation and sell those shares in the form of ADR’s on U.S. stock exchanges (NASDAQ, NYSE & AMEX).
- Every receipt has some amount of the underlying stock of a foreign company.
ADR profits to investors
- They will expand the portfolio of investments towards a more world basis.
- Under the American Conventions, they will exchange.
- They collect compensation in American Dollars for distributions.
- They will clear ADR’s by mediation processes in the U.S.
- The investors have access to trading relevant information.
ADR profits for Foreign Corporation
- They obtain access to capital in the U.S. without the hassle of regulatory filings of the U.S. SEC (Securities and Exchange Commission).
- In the U.S., business exposure is rising.
- They will expand its base of shareholders.
- They will grow the share market and boost liquidity worldwide.