A look at American Depository Reports

Type :

Term papers

Pages :

15 pages

Format :

.doc

Published date :

04/03/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
The history of American Depository Reports (ADR)
Determining price of ADR
Risks associated in ADR
Types of ADR
Process of issuing ADR
ADR market
Guidelines for ADR
Reasons for investing in foreign stocks
How to invest in foreign stocks
Benefits and drawbacks of ADR
Why big companies considering delisting their ADR?
Conclusion

Abstract

Since 1980, the value of U.S.investment in non- U.S.equities has grown approximately 100-fold to $1.9 trillion .The first ADRs were introduced in the United States in 1927 when JPMorgan issued receipts for the British retailer Selfridges. Prior to the 1980s,ADRs primarily were used by foreign companies to create stock-purchase plans for their U.S.-based employees. However, since the mid-1980s, increasing numbers of non-U.S. companies have issued ADRs to raise capital and/or to increase their U.S. exposure. Today, more than 2,100 companies from approximately 80 countries have issued ADRs that trade in the United States. Of those 2,100 ADRs, more than 500 are listed on U.S. exchanges. In some cases, ADRs may constitute 5 -15% of a company 's total shareholder base. ADR trading volume has grown significantly since 1992.The value of ADR trading peaked in 2000 at $1.1 trillion. Trading volume, measured in billions of shares has climbed every year since 1992, reaching 34.7 billion in 2003.

Globalization is the dissolution of barriers to trade and the tendency of the world's businesses to integrate customs and values. Globalization is making it increasingly easy to travel, correspond and even invest in other countries.

Investing money in your own country's stock market is relatively simple. You call your broker or login to your online account and place a buy or sell order. Investing in a company that is listed on a foreign exchange is much more difficult. Would you even know where to start? Does your broker provide services in other countries? For example, imagine the commission and foreign exchange costs on an investment in Russia or Indonesia.