American Depositary Receipt

An American Depositary Receipt (ADR) is a negotiable certificate that trades in the US whose underlying assets are shares in a foreign company. The American Depositary Receipt was introduced to facilitate the purchase of shares of companies in other countries. An American Depositary Receipt trades on US stock markets as a regular stock. A US bank issues a certificate representing an American Depositary Receipt for a certain number of shares of a foreign company trading on a foreign exchange. For example, an American Depositary Receipt with a ratio of 5:1 means that one American Depositary Receipt represents five shares of the foreign company. An American Depositary Receipt is an excellent investment for US investors who wish to capitalize on international growth potential outside the US. When investing in an American Depositary Receipt, investors must evaluate several additional foreign country related risks such as political risk, exchange rate risk, and inflationary risk. An American Depositary Receipt can provide foreign companies with the wealth offered by US equity markets. American Depositary Receipts are are listed on all the major US exchanges.