What does ADR Stand for?
The full form of ADR is the American Depositary Receipt. It is a type of negotiable instrument and is issued by any depositary bank in the United States. An ADR usually represents a percentage/proportion of an international firm’s stock, to a predefined number of shares. The ADR allows US investors to buy shares that are not traded on the domestic exchanges, just like the domestic stocks are traded in the exchanges. While ADR is strictly for American investors, companies can choose to raise capital from other countries using GDR - Global Depositary Receipts.
Apart from learning the full form of ADR, here are some quick facts about ADR that you need to know.
ADR Quick Facts
- Full form of ADR - American Depositary Receipt.
- ADRs are stocks of an international company/firm and are usually held/issued by a bank in the United States.
- These banks purchase a portion of the foreign companies and trade them on the different United States Stock Exchanges like AMEX, NASDAQ, and NYSE in the form of ADR.
- ADR provides Indian companies access to funding from any country, with high levels of savings and capital mobilization, making ADRs an extremely lucrative method of raising money.
- This international availability of funds is obtained without having to jump through the many hoops to get registered with the United States Government’s Securities and Exchange Commission (SEC).
- On the other hand, ADR provides American investors with the opportunity to invest in Indian (or other international companies).
- This offers an opportunity for portfolio diversification, as the Indian and American markets rarely behave similarly (apart from the additional benefit of investing in ForEx).
- The compensations and profits will be divided into US Dollars.
- Any judicial processes and necessary screenings will be taken care of by the issuing banks, which makes mediation extremely easy.
- Despite not being filed with the SEC, the investors will still have access to all the relevant trading information, as the banks take on the onus of performing due diligence before issuing the ADRs.
We hope this information was useful to you. Like the full form of ADR, you can learn from others our articles. This would be extremely beneficial for a banking exam.
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