Question

What does the acronym “ADR” stand for, how do ADR’s work; give three examples. Make a judgment as to the “safety” of Shell’s dividend – is it at risk of being cut, use financial data/results to support your answer.

Answer 1

According to guidelines of Chegg, I cannot provide you with any kind of reference, so I am answering by my own-

ADR means American depositary receipt and when a foreign companies going to issue their shares in the America, then it will be issuing the American depository receipts and the American depository receipts will be properly traded and it will involve global investment banks to getting listed on the American Stock Exchange.

Companies like Infosys and HDFC, Dr.Reddys have there American depository receipt listed on the American stock exchange and it will provide them with more liquidity and more recognition.

Yes, the dividend which are issued by shell are most probably going to be cut because the stability of the company has considerable gone down and there is a risk related to global impending recession So, the company is trying to preserve dividend and sustain and survive through this global downturn and company has a high amount of debt in its overall balance sheet and it is cutting upon its dividend in order to have more liquidity.