American Depository Receipt

Business, Legal & Accounting Glossary

Definition: American Depository Receipt



What is the dictionary definition of American Depository Receipt?

Dictionary Definition


n. called in the banking trade an ADR, it is a receipt issued by American banks to Americans as a substitute for actual ownership of shares of foreign stocks. ADRs are traded on American stock exchanges and over-the-counter easily without the necessity of trading the foreign shares themselves.


Full Definition of American Depository Receipt


An American Depository Receipt (ADR) is a negotiable, registered certificate representing a specific number of corporate stocks in a non-U.S. company. An ADR documents the holder’s beneficial ownership of foreign stock held in trust by a foreign branch or correspondent of an American bank. Introduced in 1927, an ADR provides the American investor with the opportunity for diversification into select global securities without the usual hassles like foreign currency conversions and safekeeping charges. An ADR is quoted in US dollars on the major US exchanges or over-the-counter and pays dividends in US dollars.

ADR is offered as:

  1. Sponsored ADR, issued by a US Bank as a depository for a foreign company. Level I Sponsored ADR requires less financial disclosures and is traded over the counter only. Levels II and III are subject to stricter financial and accounting standards.
  2. Unsponsored ADR, offered directly by the depository institution without any involvement by the company and is the least regulated.
    Potential risks to investing in an ADR include foreign currency risk, lower liquidity, and foreign tax withholding.

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Definition Sources


Definitions for American Depository Receipt are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 1 Views.