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Abstract Diversification is a costly process. However, regardless of its costliness, most investors give preference to international diversification of their portfolios due to the potential benefits of similar decisions. Still, there are different tools for diversifying foreign investment portfolios. However, the paper at hand will focus on one of the – American Depositary Receipts or ADRs. In simple terms, these are stocks of foreign companies available on the stock exchanges operating in the United States. They are commonly invested in due to a variety of benefits, including options for decreased barriers to injecting funds in foreign companies, entering developing and developed markets, timely dividends and corporate action notifications, purchasing and selling foreign stocks easily, etc. Therefore, the objective of the given report is to study the benefits of ADRs mentioned above in detail, describe some other advantages, and make an attempt to explain what makes this diversification tool so attractive with the special focus on economic fundamentals of the countries issuing them. Introduction As the national economies become more open and interconnected, the borders between states are becoming nearly transparent. It is true for almost all areas of international economic relations, and investment is not an exception to the overall rule. Deeper integration of the global economy is connected to the emergence of the international platform for investments. With the increased bonds between states, national investors began searching for options of injecting funds in foreign companies without leaving their countries. The very process of investing in different organizations is referred to as diversification of investment portfolios. It has become especially popular over the last several decades (Pleven, 2014). However, regardless of its popularity, diversification is associated with increased costs. Still, even though it is a costly process, most investors are interested in taking this step, as they count for potential benefits of diversification. Nowadays, there are different approaches to diversification and investors deploy varying tools for maximizing its benefits. One of these tools is known as American Depositary Receipts. They are commonly referred to as ADRs. Putting it simply, ADRs stand for stocks issued by foreign companies. However, these stocks are easily available on the stock exchanges operating in the United States. It means that even though purchasing them is perceived as foreign investment, there is no actual need for national investors to leave their countries to complete these operations. This diversification instrument is popular regardless of the developments in the stock market. It can be explained by a variety of benefits. Here, it is essential to point to the fact that ADRs are beneficial for both investors and companies issuing them. For investors, injecting funds in American Depositary Receipts is associated with easier access to the foreign market, decreased barriers to allocating capital in the foreign business environment, improved performance of investment portfolios, timely dividends, and corporate action notifications, purchasing and selling foreign stocks easily, etc. As for the companies and countries issuing them, ADRs are connected with the increased inflow of foreign investment in national economies as well as the increased value of companies listed on the United States stock exchanges and visibility in both regional and global economy. Therefore, the paper at hand aims at studying the abovementioned benefits in detail. Get your 100% original paper on any topic done in as little as 3 hours Learn More Search Methodology To identify the main benefits of ADRs as an international diversification instrument, a comprehensive literature search was conducted via Google search engine and search engines of different databases, including ProQuest, Google Scholar, and EBSCOhost. The main search request was “benefits of ADRs for international diversification of investment portfolios.” To make the research findings more comprehensive, different sources were included: articles published in peer-reviewed journals as well as business and finance magazines and materials available online. There were only two inclusion criteria: relevance of information and date of publication – within the last five years. Primary research findings can be found in Table A1 (see Appendix A). Benefits of ADRs as a Diversification Tool for Investors Greater Access to Foreign Markets and Companies Even though the United States is one of the leaders in the global economy, it does not necessarily mean that all of the most powerful and influential companies operating in the American environment. Instead, ten most attractive firms are non-American (Crimmins, 2017). It points to the need for seeking ways to purchase their stocks. However, it is essential to note that diversification with ADRs is not related to investing in economic giants only. In this case, the only aspect of ADRs that matters is an opportunity to reach any market and any company of interest regardless of the level of its development or prospects of future growth. More than that, in the case of investing in ADRs, barriers to purchasing foreign stocks are eliminated because there is no need for conducting trading operations abroad (Hales


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