The Transforming Enterprise: Company Performance After Privatization in Hungary Between 1988 and 1997¹

Abstract

In this article I discuss the complex relationship among privatization, company restructuring after privatization, and corporate performance in Hungary during the first nine years of the transition. The analysis is based on two large samples of the Hungarian companies. The first group embraces all companies with double entry book-keeping. The second, smaller group consists of the companies that are subordinated to the state privatization agencies. Corporate performance is measured by a set of indicators that cover the companies' profitability, efficiency, labor productivity and financial state. A statistical and a multi-regression analysis are applied to describe the relationship between ownership change and corporate performance. Based on the above analysis I show that the transforming enterprise is a special blend of the ‘textbook company’ during restructuring, as it is described by the theory of industrial organization and by the institutionalist theory of the firm, and a ‘mutant’ state-owned enterprise that operates under extreme uncertainties.