Difference Between ADR and GDR

Know About the Difference Between ADR and GDR

Terminologies like ADR and GDR are concepts used in terms of economics to understand the capital market. For students, this concept forms a part of their syllabus in class 11th Business studies in the commerce stream. However, students often miss out on understanding these terms and find the subject to be difficult. Whereas, in reality, these are very simple concepts if taught and learned properly. 

The students need not worry anymore as a team of experts at Vedantu has analyzed the challenges faced by the students and has scientifically prepared notes on various similar terms making it simpler for the students to understand. 

Download the free PDF notes from the study materials available on the Website of Vedantu https://www.vedantu.com/ or students can also access the study materials from Vedantu's mobile app. 


In this Article, Students will be Able to Learn the Following Concepts Related to ADR and GDR- 

  • What is an ADR?

  • What is a GDR?

  • What is the significant difference between ADR and GDR?

  • Key takeaways from the chapter

  • Frequently asked questions 


What is an ADR?

An American depositary receipt abbreviated as ADR is a type of negotiable certificate that is issued by a U.S. depositary bank that represents a specified number of shares, generally a single share- which is of a foreign company's stock. The ADR trades on the U.S. stock markets as any domestic shares would trade. 


What is a GDR?

A global depository receipt which is abbreviated as GDR is quite similar to the American Depository Receipt. This is a type of bank certificate which represents the share in a foreign company. This is a foreign bank that holds the shares internationally. The shares are traded as domestic shares among them, but, globally, various bank branches offer the shares for sale.


What is the Difference Between ADR and GDR:


Basis for Comparison

ADR

GDR

Full-Form

American Depository Receipt

Global Depository Receipt

Meaning

This is a negotiable instrument which is issued by the US Bank, which represents the Non- US Company stock that is being traded in the US stock exchange.

GDR is a negotiable instrument which is issued by the international depository bank that represents the foreign company’s stock trading world-wide.

Relevance 

Foreign companies are able to trade in the US Stock Market.

In this case, the foreign companies can trade in any country’s stock market other than that of the US.

Issued where

In the United States domestic capital market.

European Capital market.

Listed in 

In the American Stock Exchange like the NYSE or the NASDAQ.

In the Non-US Stock Exchange like the London Stock Exchange or the Luxembourg Stock exchange.  

Negotiation is done

Only in America

All over the world

Disclosure Required

Onerous

Less Onerous

Market

Retail Investor Market

Institutional Market


Key Takeaways from the Chapter - 

  • ADR is issued by a US bank making it easy for the US investors to invest in foreign companies.

  • GDR is issued by a depository bank located outside the domestic boundaries of the company

  • The difference between ADR and GDR is on the basis of - 

  1. Meaning

  2. Currency 

  3. Purpose

  4. Issues by 

  5. Stock exchanges they are listed on  

  6. Market

FAQs on Difference Between ADR and GDR

1. How can GDR be used in real life?

Let us understand it with the help of a hypothetical example. ABC is a company in India, this ABC company is looking to list its stocks on the London  stock exchange. This ABC company will get into an agreement with the depository bank of London. The depository bank will issue the shares to the people of London after getting permission from the company’s domestic custodian. 


The subject experts at Vedantu make use of hypothetical situations and real life examples to explain the concepts to the students. Thus, students are able to learn faster and retain the knowledge for a longer period.

2. What is a depository bank?

A depository can be an organization, bank, or institution that holds securities and assets in the trading of securities. A depository provides security and liquidity in the market, uses money deposited for safekeeping to lend to others, invests in other securities, and offers a funds transfer system.


The concepts have been explained in detail by the teachers of Vedantu on e-learning courses. Download the Free PDF of the topic to understand the concept well and level up your preparation with us.

3. What are the examples of Depository organizations in India?

Depository organizations can be a bank or other institutes. Some of the examples are - 

  • Depository Participants of NSDL.

  • National Stock on India Ltd.

  • Industrial Development Bank of India.

  • State Bank of India.

  • HDFC Bank Ltd.

  • Deutsche Bank.

  • Axis Bank.

  • Citi Bank.

Such examples are used in the explanation for making the students more aware and understand the practical uses of the concepts.

4. Is the topic ADR and GDR difficult to understand?

The term might look difficult to the students in the first instance. But when students read about the concept from the notes provided by Vedantu or refer to the video lectures they will understand the simplicity of the topic. These terms will no longer be jargon for the students.


So, the topic in itself is simple, it only depends on how a student approaches and how much time they devote to learning.

5. Are the notes available on Vedantu sufficient to cover the topic ADR and GDR?

The topic has been holistically covered by the faculty of Vedantu. So, students who are approaching the topic for their higher secondary examinations can sufficiently learn from the article. Students first refer to the materials available with them in their textbooks, then use the notes provided by Vedantu to add value to their existing notes. Finally, refer to the video lectures to clear any doubts related to the topic. Students can anytime approach the students’ helpline number for their queries.

6. What is the Meaning of Negotiable Instrument?

A negotiable instrument is literally a signed document that promises a sum of payment to a specified person or to the assignee. This is a formalized instrument that is transferable. A Negotiable Instrument is a signed document. This promises to pay the bearer a sum of money at a future date or on-demand. The payee, the one who is receiving the payment, must be named else it will be indicated on the instrument.


Negotiable Instruments are the written contracts, these benefits could be passed on from its original holder to a new holder. Negotiable instruments are the documents that promise payment to the assignee (the person whom it is assigned to/given to) or a specified person.

7. What is a Stock Exchange?

A stock exchange is of a centralized location where the shares, that are of publicly-traded companies are bought and sold. The main difference between using a stock exchange and over-the-counter (OTC) methods of trading stocks is that, on an exchange, transactions are transferred than taking place directly between the two parties.


The stock exchange searches for a sell order for the same share. The exchange then facilitates the actual transfer of ownership of shares from the sellers to the buyers.

8. Who are Public Listed Companies?

A public listed company is such a company whose shares are available on the open market. A public company is listed on a stock exchange (listed company), this facilitates the trade of shares. In some jurisdictions, public companies over a certain size are mandatory to be listed on an exchange.

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