ADR Meaning: Here’s What It Means and How To Use It

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Have you ever heard of the acronym ADR? This grouping of three letters represents a couple of different phrases. Both of these meanings are incredibly important — one in the world of finance and one in the world of business disagreements. 

Let’s learn more about our word of the day, ADR. 

What Is the Meaning of the Word ADR?

As mentioned above, ADR is an acronym that can stand for two different phrases. The first is American Depositary Receipt, and the second is alternative dispute resolution. Here are some quick definitions for both:

American Depositary Receipt

  • A document in the US financial system that is used for buying, selling, and trading shares in foreign companies. They convert from foreign currency to US dollars, and they are traded similarly to stocks in American companies.

Alternative dispute resolution

  • A strategy for resolving conflict between organizations or entities that do not utilize the court of law.

American Depositary Receipt

An American Depositary Receipt (ADR) is an important tool for Americans investing in the stock market. ADRs allow Americans to buy foreign stock from foreign countries with ease. It’s of great benefit to U.S. investors who want to expand their portfolios and to foreign issuers looking to trade stock. 

ADRs are traded in the U.S. stock exchange just like stocks. Although the ADR is not the foreign shares themselves, it gives the buyer the rights to the shares of the non-U.S. company. 

ADR processes are as simple as buying regular stocks. Some ADRs are worth multiple shares, while others are only worth one. 

This tool essentially expands the U.S. market, allowing stock market investors to invest in other jurisdictions. 

The acronym is often mistaken as “American Depository Receipts” instead of “American Depositary Receipts,” but the latter is correct.

Alternative Dispute Resolution

There are lots of instances in the workplace or in inter-business dealings where two entities have a dispute. In many cases, it is simply better to resolve the dispute through other means rather than getting a court involved. That’s where ADR comes into play. 

An ADR program consists of several types of ADR, including arbitration, binding arbitration, conciliation, neutral evaluation, and more. Companies that use ADR and avoid court proceedings often come to a fair resolution that doesn’t require the expenses of going to court, making it a better solution for everybody.

Where Did the Word ADR Come From?

To help clarify the definition of ADR, let’s look at the history of how these phrases came to be. 

American Depositary Receipts were first introduced into the U.S. economy in 1927. The idea was first implemented by JP Morgan’s predecessor Guaranty Trust. It allowed U.S. investors to buy shares from a famous British retailer. 

Then in 1931, the bank launched the first sponsored ADR for Electrical & Musical Industries, a British music company. 

They were especially valuable back then because of the immense difficulties of investing overseas back then. Now that the internet is around, it’s easier to invest normally in foreign markets, but there are still benefits to ADR because of the currency transfer. You also don’t have to learn about the regulations in foreign markets. 

Alternative Dispute Resolution

In this context, ADR was first introduced in the 1970s. It was a tactic that was designed to help ease the backlog in the courts because they were so behind. These tactics started to get implemented in various cases around then. 

Then in 1985, the Attorney General gave an order recognizing the importance of ADR in lowering the time and expense required for regular litigation. Then in 1990, Congress passed the first ADR legislation. 

Since then, more and more legislation has encouraged the use of ADR in workplace conflicts, and it is now an important tool in workplace conflict resolution. 

What Are Some Examples of the Word ADR in a Sentence?

Seeing a word in context can help bring more clarity to its definition and how you can use it in your own life. Here are some example sentences that use the word ADR.

American Depositary Receipt

I’ve started investing in ADRs to diversify my portfolio a bit away from U.S. securities.

Do you think you can buy ADR just like normal in the New York Stock Exchange?

I wouldn’t mess around with unsponsored ADR. That over-the-counter market (OTC) stuff seems a little risky to me.

I’ve been able to get access to a lot of foreign shares and assets through ADR. 

Alternative Dispute Resolution

Do you think we should try to go with ADR, or does this matter need to be taken to court?

If we hadn’t done ADR, we would have spent so much more time and money resolving this conflict.   

My company wants to resolve this with ADR, but I don’t trust them, so I’m planning to take them all the way to court. 

The HR department is familiar with the ADR processes, so I would ask them what the best course of action is. 

The Word ADR

If you’re in the business world, it is probably a good idea to know the difference between the two definitions of ADR. This way, you can figure out through context clues which one is being used and effectively contribute to the conversation. Try figuring out the meaning of ADR in a sentence or using it in your writing today! 


ADR | Cambridge English Dictionary 

Alternative Dispute Resolution | U.S. Department of Labor  

Alternate Dispute Resolution Handbook | US Office of Personell Management 

American Depositary Receipt | United States Office of Government Ethics