Question

What is a major advantage of issuing ADRs to the company? To the investor?

Answer 1

ADR stands for American Deposit Receipts.

It has lots of Advantages for different stakeholders. Such stakeholders include companies , investors etc .some of its advantages are as follows

1.Companies who want to have it's investor b from whole world opt for ADR because directly issuing shares in American market is a very lenghty process. So. Company issues ADR directly for their convenience.

2.Investors who wants international diversification have the option of diversifying as ADR give them option to invest in their own country even if securities are of any country of the world.

3 ADR holders also have the benefits of currency fluctuation if it is in their favour when they receive dividend and sell their ADR as per their convenience.

4.Companies who lacks funds a for day to day operations and require fund for future growth can raise money by issuing ADR because many times there is shortage of funds and people are not interested in equities as they want such investment from which they earn continuously. securities which makes it difficult for a company to raise funds through equity market by issuing normal shares or debenture s and that is where ADR can be used for the company wants fund.

5.It provide Investors some permanent means of fixed income

6.To purchase ADR is  easier than purchasing foreign stock for an investor compared to the normal process.

7.US investors also save money and earn more because the whole ADR system is built around dollar priceing.

8.