American Depositary Receipts (ADR) is a U.S. dollar($) denominated form of share in a non-U.S. company. It represents the shares of the foreign company held on credit by a custodian bank in respective home country and it bears the corporate and economic rights of the foreign shares, subject to the terms and conditions specified on the ADR certificate.
ADRs can be represented by a physical ADR certificate. The terms "ADR" and "ADS" are habitually used interchangeably. ADSs provide U.S. investors with a suitable way to invest in securities in a foreign country and pave path to trade non-U.S. securities in the U.S. stock exchanges.
ADSs are issued by a depository bank. They are traded in the same mode as shares in U.S. companies, on the the American Stock Exchange (AMEX) and New York Stock Exchange (NYSE) or quoted on NASDAQ and the over-the-counter (OTC) market.
Although ADRs are U.S. dollar denominated certificates and pay dividends in U.S. dollars, they do not get rid of the currency exposure associated with an investment in a non-U.S. company.
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