American Depository Receipts

Every company is interested to get investment from developed countries investors. Simply, I can say that if my company name is Accounting Education Corporation and I have registered this company in Indian Company registrar by making small association of my friends. After this I can sell my company’s shares in Indian share market. But If I want to make large scale company, for fulfill my other business aims like spreading quality accounting education at international level, I need to buy high infrastructure. For this I need money. Money can be received from selling large number of shares in developed countries. USA is also developed country. Every dollar will become in India Rs. 45, suppose if I sell 100 shares of $ 1 each, then it means I have received Rs. 4500.  But USA does not allow every company to trade in USA. For trading in USA, I need ADR. Now, you can understand what ADRs is. Now understand its definition.

Definition of ADRs

American depository receipt is the receipt for trading of non US Company in the stock market of USA. IF any non USA company is interested to trade in USA stock market, then it can receive ADR level one, ADR level two and ADR level three. ADR for level one can easily get after accepting the conditions of SEC of USA but major problem is that this ADR can only use for getting investment from USA and it can not be used for getting investment money from any other country. It is the reason that Indian company prefers to get GDR instead of ADR. Students who are studying finance should understand one thing that ADRs is compulsory to sell shares in USA. No one can sell shares with GDRs as the substitute of ADRs. Any company can start trading in USA stock exchange after buying ADRs from New York Stock exchange or NASDAQ.


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Accounting Education: American Depository Receipts
American Depository Receipts
Accounting Education
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