What Is ADR in Stock Market?
5paisa Research Team
Last Updated: 26 Feb, 2025 10:55 PM IST

Content
- Introduction
- American Depositary Receipts (ADRs) Meaning in Share Market
- How do American Depositary Receipts (ADRs) work?
- Taxing and reporting
- Different Types of ADR programs
- American Depositary Receipt Pricing and Costs
- ADR Fees
- ADRs and Taxes
- Advantages and Disadvantages of American Depositary Receipts
- ADR risk factors and expenses
- Conclusion
Introduction
The ADR full form in stock market, American Depositary Receipts (ADRs), are financial instruments that allow investors in the United States to invest in foreign companies. An ADR is a negotiable certificate that represents ownership of a certain number of shares in a foreign company. The ADRs are issued by a US depository bank, which holds the foreign company's shares in custody.
The ADRs trade on US stock exchanges like regular stocks and their value is based on the value of the foreign company's shares in their home market. ADRs allow US investors to invest in foreign companies without having to deal with the complexities of foreign markets and currencies.
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Frequently Asked Questions
Foreign companies list ADRs to attract investment from U.S. investors without having to comply with the regulations of U.S. stock exchanges. ADRs provide U.S. investors with an easier way to invest in foreign companies and also offer liquidity to the foreign company's shares.
ADRs are issued by U.S. banks and represent ownership of shares in a foreign company, while GDRs are issued by banks outside the U.S. and represent ownership of shares in a foreign company but are denominated in a currency other than the company's home currency.
No, ADRs do not eliminate exchange rate risk. ADR investors are still exposed to currency fluctuations between the foreign company's home currency and the U.S. dollar. However, ADRs do provide a way for investors to invest in foreign companies without having to deal with foreign exchanges and regulations.