An Analysis of Lockups in REIT IPOs Hsuan-Chi Chen & Robert (Chi-Wing) Fok & Chiuling Lu Published online: 22 December 2009 # Springer Science+Business Media, LLC 2009 Abstract We analyze how the unique characteristics of real estate investment trusts (REITs) affect IPO lockup agreements from 1980 to 2006. The findings show that, unlike industrial IPOs, lockup periods for REIT IPOs do not cluster at 180 days, tend to cover longer periods, and vary over time. Our results support the commitment device hypothesis instead of the signaling hypothesis. That is, REIT managers tend to use lockup agreements to alleviate moral hazard problems and protect post-IPO investors rather than to send signals to investors. Finally, contrary to previous studies, we find no significant negative abnormal returns around the unlock date for the whole sample. The lack of aggressive sales by insiders and the fact that REITs are not backed by venture capitalists can explain our finding. Keywords Real estate investment trust . Lockup . Initial public offering . Signaling hypothesis . Commitment device . Moral hazard JEL Classification G11 . G21 J Real Estate Finan Econ (2011) 43:359–384 DOI 10.1007/s11146-009-9228-5 H.-C. Chen Anderson School of Management, University of New Mexico, Albuquerque, NM 87131, USA R. (.-W. Fok Department of Business, University of Wisconsin-Parkside, 900 Wood Road, P.O. Box 2000, Kenosha, WI 53141-2000, USA C. Lu (*) Department of International Business, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 10617, Taiwan e-mail: chiulinglu@management.ntu.edu.tw R. C.-W. Fok