This paper examines how abstract language in the prospectuses of newly public firms influences evaluators’ selection of referents for performance comparison of these firms. Drawing on insights from linguistics research and cognitive bases of categorization, this paper suggests that abstract firm descriptions of newly public firms lead to diverse cognitive interpretations by critics, resulting in the selection of referents from outside the focal firm’s industry. Furthermore, abstract descriptions, which lead to varying interpretations by evaluators, result in dissensus among them. An empirical examination of 171 newly public internet firms supports these hypotheses. As such, this paper shows that language attributes can have important implications for how critics categorize newly public firms.
