American Depositary Receipt (ADR)
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Access to larger pool of potential investors - By listing their stocks on an American exchange via ADRs rather than trying to list them independently in each country where they operate, companies can gain exposure to a much larger group of potential shareholders than they would otherwise have access too . This is especially beneficial for smaller or newer firms who may not have the resources or name recognition needed to attract attention from international investors outside of their home market . -
Lower costs and less hassle - Listed companies incur significant costs related listing requirements such as legal fees , accounting expenses ,and regulatory filing fees . In addition , being listed on an exchange also requires management time and effort devoted towards complying with ongoing disclosure requirements .. For many firms ,the cost savings and administrative efficiencies gained through issuing ADRs often outweigh any perceived benefits associated with maintaining independence from global capital markets ..
- Diversification - Investing in foreign companies provides exposure to new economic trends and opportunities that might not be available locally . Additionally , holding securities in multiple countries helps reduce overall portfolio risk .
