What does American depositary receipt mean?

An American depositary recipe is a certificate that is negotiable, representing one or more shares in foreign stocks, printed and traded in the United States. American depositary receipts are denominated in dollars (USD), while the underlying security is held by a financial institution overseas belonging to the United States. A receipt helps to reduce administration and the duty cost which would normally be levied on every transaction.

By using ADRs, investors can easily buy shares in foreign companies, meanwhile realizing any and all dividends along with capital gains in dollars. However, these receipts do not remove the economic risks and currency for underlying shares in a different country. An example for this would be, if dividend payments in euros would normally be converted to USDs, making the net of conversion expenses along with foreign taxes all of which would be in accordance with the initial deposit agreement. American depositary receipts are listed on any of the following: AMEX, Nasdaq, or NYSE.