American Depositary Receipt (ADR)

A negotiable certificate issued by a U.S. bank representing a specified number of shares in a foreign stock that is traded on a U.S. exchange. The stocks of most foreign companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs). Each ADR represents one or more shares of foreign stock or a fraction of a share. If an individual owns an ADR, he or she has the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR corresponds to the price of the foreign stock in its home market, adjusted to the ratio of the ADRs to foreign company shares.