An IDR, meaning International Depository Receipt, is an important tool used commonly in cross-border finance. While we normally tackle client-facing topics like how to open US bank accounts for non-residents, we thought we’d detail what IDRs are and how you might be able to use them.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- IDR Meaning
- Benefits of an International Depository Receipt (IDR)
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
IDR Meaning
IDR, meaning “International Depository Receipt”, is a financial instrument that is used by companies to attract foreign investors and used by investors to gain access to desirable international securities.
IDRs are used when a company is not traded on major international exchanges. That said, they typically still provide the investor with access to the same rights and benefits of direct shareholding. This includes access to dividends and voting rights for the underlying securities held through the IDR by the investor.
Not surprisingly, IDRs are attractive to wealthy investors with high liquid net worth who are seeking access to companies that are listed in foreign countries. Likewise, because IDRs are issued in foreign currencies, they can be a clever financial proxy for foreign investors to effectively hold or remit payments in certain international currencies that are not easily accessible abroad.
In other words, the true meaning of an IDR is that it unlocks access to foreign markets, foreign securities, and foreign capital.
Benefits of an International Depository Receipt (IDR)
The benefits of an International Depository Receipt (IDR) include access to international investments that are otherwise unavailable, a more efficient way to trade smaller international stocks through major exchanges rather than local stock markets, exposure to international currencies through foreign listed securities, the same benefits and rights as individuals with direct shareholding.
Here is a closer look at the specific benefits you can expect from IDRs:
- Access to international investments that are otherwise unavailable
- More efficient way to trade smaller international stocks through major exchanges
- Exposure to international currencies through foreign-listed securities
- Plus the same benefits and rights as individuals with direct shareholding
Of course, it’s also important to acknowledge the benefits that a company and a country can gain from IDRs as well. In the case of small emerging markets, IDRs can be one of the most effective ways to gain traction with international investors.
For example, small emerging markets with significant reserves of natural resources may find that IDRs are one way for their companies to increase liquidity and increase in value.
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Frequently Asked Questions
Below are two of the most common questions we receive from people looking into the meaning of IDR. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Does IDR Mean in Banking?
In banking, IDR refers to an International Depository Receipt, which is a financial instrument that enables investors to indirectly buy and sell shares of a company in another country. In most cases, IDRs are treated just like shares, with rights to dividends and normal shareholder voting rights.
What Is the Difference Between IDR and GDR?
The main difference between an International Depository Receipt (IDR) and Global Depository Receipt (GDR) is that IDRs are issued and traded in a country where a company’s shares are not listed while GDRs are traded globally on a wide range of stock exchanges.
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