American Depository Receipts (ADR): Sometimes, shares of a firm are traded
by indirect route in the form of depository receipts. The shares issued by the
firm are held by a depository who is a large international bank which receives
dividends, reports etc. and issues claims against these. The claims are called
depository receipts. Each receipt is a claim on specified number of shares. The
depository receipts are denominated in a foreign currency usually US dollars.
The depository receipts are listed and traded on major stock exchanges. The
issuing firm pays dividends in the home currency of the firm and the depository
converts the same to dollar and pays to investors. This mechanism originated in
the US and is called American Depository Receipts (ADRs).
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