It is negotiable security, that represents securities of a company that are issued by the U.S Bank.
The stocks of foreign companies are traded in the American markets and are purchased by investors in the U.S.
Investors can purchase ADRs from broker/dealers.
These broker/dealers, in turn, can obtain ADRs for their clients in two ways:
1. They can purchase already issued ADRs on a U.S. Exchange.
2. They can create new ADRs.
ADRs are listed on the NYSE, NASDAQ, AMEX and can be sold over the counter.
ADRs are issued and pay dividends in the U.S.
Dollars, making them a good way for domestic investors to own shares of a foreign company without the complications of currency conversion.
The company pays dividends in its native currency and the issuing bank distributes those dividends in dollars net of conversion costs and foreign taxes to ADR shareholders.
When the exchange rate changes, the value of the dividend changes.