Definition of Global Depositary Receipt (GDR)

receipt for shares in a foreign-based corporation traded in capital markets around the world. While American Depositary Receipts permit foreign corporations to offer shares to American citizens, Global Depositary Receipts (GDRs) allow companies in Europe, Asia, the United States and Latin America to offer shares in many markets around the world. The advantage to the issuing company is that they can raise capital in many markets, as opposed to just their home market. The advantage of GDRs to local investors is that they do not have to buy shares through the issuing company's home exchange, which may be difficult and expensive. In addition, the share price and all dividends are converted into the shareholder's home currency. Many GDRs are issued by companies in emerging markets such as China, India, Brazil, and South Korea and are traded on major stock exchanges, particularly the London SEAQ International Trading system. Because the companies issuing GDRs are not as well established and do not use the same accounting systems as traditional Western corporations, their stocks tend to be more volatile and less liquid.