American Depositary Receipts, or ADRs, are an investment tool that makes it easier for people to invest in foreign markets. An investor doesn't have to find a broker who can work in the foreign markets where the securities trade. Instead, they can just get ADRs from a bank that holds the shares of the foreign company.
Then, these ADRs can stand in for shares on that foreign market. There are a lot of good reasons to use ADRs, which we have...
American Depositary Receipts, or ADRs, are an investment tool that makes it easier for people to invest in foreign markets. An investor doesn't have to find a broker who can work in the foreign markets where the securities trade. Instead, they can just get ADRs from a bank that holds the shares of the foreign company.
Then, these ADRs can stand in for shares on that foreign market. We've talked about some of the benefits of using ADRs in class, like how liquid these assets are. Since it's now easier than ever to invest in foreign markets, the market has become much more liquid. The amount of money traded in ADRs each year has gone from $75 billion in 1990 to $550 billion in 2002. We don't have to use different brokers or go through a lot of red tape to sell foreign investments. Instead, we can just trade ADRs.
With the help of depositary receipts, we can see that as technology has improved, it has become easier to invest in foreign companies. Depositary receipts are not only made in the United States, but also in other countries like the Euro, Singapore, and China. "Bank of Communications Seeks Listing," an article in the Wall Street Journal from 2/24/06, shows that the Hong Kong-listed Bank of Communications Co. has been given permission to sell shares on China's stock exchange and is willing to sell China depositary receipts (CDRs). By giving out CDRs, the bank makes it easier for foreign investors to buy shares.
If you want to learn more about American Depositary Receipts, try reading some of the Wall Street Journal's online articles. Just go to www.wallstreetjournal.com and look for them there. It's a great thing to have. I would also look at some of the other articles you might find if you do a search on Google.
