Global Depositary Receipts (GDRs) are certificates issued by banks that represent shares in foreign public companies. GDRs are useful for investors looking to diversify their portfolios, but they also carry higher risk due to volatility in foreign currency exchange rates.
An example of a GDR is if a U.S. listed company wants to list its shares on the Amsterdam Stock Exchange, it can do so by issuing GDRs. Like stocks, GDR holders are also eligible for dividends. Both GDRs & their dividends are denominated in the local currency where they’re traded.