American depositary receipt (ADR)

An ADR is a security that is created by a US bank. It evidences ownership to a specified number of shares of a foreign security held in a depositary in the issuing company's country of domicile. The certificate, transfer, and settlement practices for ADRs are generally identical to those for US securities. American investors may prefer ADRs to direct purchase of foreign shares because of (1) the ready availability of price information, (2) lower transaction costs, and (3) timely dividend distribution