American Depository Receipt (ADR)

Definition - What does American Depository Receipt (ADR) mean?

An American depository receipt (ADR) is a certificate that reflects ownership of stock in foreign companies. These receipts are commonly offered by U.S. banks. American financial institutions in foreign countries actually hold the security, but ownership of the depository receipt represents ownership of the actual security. In the context of the law, ownership of such receipts is legally enforceable.

Justipedia explains American Depository Receipt (ADR)

American banks often offer American depository receipts because actually buying shares of foreign companies can be complicated. So instead, American banks offer the ADRs as a stand-in for the actual shares. This can save a lot of costs, such as administrative and duty costs. American depository receipts are often offered on major stock exchanges, such as the New York Stock Exchange and the Nasdaq. American depository receipts are commonly bought by people who want to invest overseas.

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