Journal of Banking & Finance 34 (2010) 324–335

Journal of Banking & Finance 34 (2010) 324–335

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Journal of Banking & Finance

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Long-term debt and overinvestment agency problem

Ranjan D’Mello a,*, Mercedes Miranda b

a Department of Finance, Wayne State University, 328.8 Prentis, Detroit, MI 48202, United States b Department of Accounting and Finance, The University of Michigan-Dearborn, Dearborn, MI 48126, United States

a r t i c l e i n f o a b s t r a c t

Article history: Received 6 March 2009 Accepted 27 July 2009 Available online 30 July 2009

JEL classification: G30 G31 G32

Keywords: Debt issues Agency costs Overinvestments

0378-4266/$ – see front matter � 2009 Elsevier B.V. A doi:10.1016/j.jbankfin.2009.07.021

  • Corresponding author. Tel.: +1 313 577 7828; fax E-mail addresses: rdmello@wayne.edu (R. D’Mello

(M. Miranda). 1 The underlying assumption is that managers’ perqu

We investigate the role of long-term debt in influencing overinvestments by analyzing the pattern of abnormal investments around a new debt offering by unlevered firms. Before being levered when the dis- ciplining role of debt is missing, firms retain excessive amounts of cash. The introduction of debt leads to a dramatic decline in cash ratios and the relation is stronger for firms classified as having poor investment opportunities. For the sub-sample of firms that overinvest in real assets, issuing debt leads to a reduction in abnormal capital expenditures. The decline in overinvestments is explained by debt service obligations that reduce discretionary funds under managerial control. Further, the reduction in overinvestments has a positive impact on equity value. These conclusions hold in other settings where there is a dramatic change in firms’ capital structures providing strong support for the hypothesis that debt reduces overinvestments.

� 2009 Elsevier B.V. All rights reserved.

  1. Introduction ies that analyze capital structures find that firms with poor growth 2

2 An exception is Harvey et al. (2004) who examine the effect of debt on agency and information problems in emerging market firms that routinely have pyramid ownership structures and the role of international debt in ameliorating these problems.

The free cash flow theory posits that managers of firms with funds in excess of that required to finance positive NPV projects do not distribute the cash to shareholders. Rather, these firms either maintain surplus amounts of cash (i.e., overinvest in cash) or invest excessively in real assets (i.e., overinvest in capital expen- ditures). These overinvestments, while maximizing managers’ per- sonal utility, reduce firm value.1 Myers (1977), Jensen (1986), and Stulz (1990) among others argue that a potential solution to the overinvestment problem is to issue debt. Debt disciplines managers by forcing them to pay out excess cash thereby reducing the amount of funds under their discretion. In addition, when debt is issued in a swap for equity, the fraction of managerial stock ownership in- creases further aligning managers’ interest with that of shareholders. Issuing debt is therefore hypothesized to mitigate managers’ pro- pensity to overinvest and this benefit of debt is an important factor in determining a firm’s optimum leverage ratio in the tradeoff theory.

While there is a lot of theoretical justification for issuing debt to control abnormal investments, henceforth referred to as the over- investment control hypothesis, there is limited empirical evidence that directly supports the hypothesis. For example, previous stud-

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: +1 313 577 5486. ), mmirand@umd.umich.edu

isites increase with firm size.

opportunities have high debt levels with long-term maturity. However, these results do not clearly establish that managers of firms that do not face the monitoring role of debt engage in value dissipating investments and issuing debt reduces or eliminates these overinvestments.

In this paper we present a direct test of the overinvestment hypothesis by examining the pattern of abnormal investments around a debt issue conducted by firms that have been unlevered for some time before the offering.3 This relatively unique event pro- vides an ideal environment to test two major implications of the hypothesis. First, that self-interested managers of unlevered firm are more likely to overinvest because they are not subject to the dis- ciplining role of debt. Second, that the introduction of leverage will lower these overinvestments because debt reduces the amount of discretionary funds under the control of managers.

3 We do not attempt to answer the more general question of why firms conduct a debt IPO, an issue that has been addressed by Datta et al. (2000). A point to be noted is that while Datta et al. investigate reputation building, information asymmetry, and optimum debt mix as possible rationales, they do not examine reduction in agency costs as a motivation, which is the focus of our paper. Also see Krishnaswami and Yaman (2007) and Hale and Santos (2008). Barry et al. (2009) test the market timing hypothesis.

http://dx.doi.org/10.1016/j.jbankfin.2009.07.021
mailto:rdmello@wayne.edu
mailto:mmirand@umd.umich.edu
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Table 1 Descriptive statistics for sample firms.

Variable Mean Median

Book value of asset 153.24 29.60 Market value of asset 476.02 61.30 Market value of equity 432.26 50.85 Sales 217.39 29.50 Market-to-book ratio 2.62 1.63 Debt ratio – year 0 (%) 39.88 19.08 Cash 28.80 5.89 R&D 4.00 0.00 Capital expenditure 16.36 1.41

Descriptive statistics for a sample of 366 debt offerings between 1968 and 2001 by previously unlevered firms. A debt issue is deemed to have been conducted when the difference in long-term debt relative to the previous year exceeds five percent of the pre-issue book value of assets. An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years subsequent to the offering. Net asset ratio is book assets less long-term debt market value of assets is book value of assets plus the difference between the book value and market value of equity. Market value of equity is the year-end shares outstanding times the market price. Market-to-book ratio is market value of assets divided by book value of assets. R&D is assigned a value of 0 if no data is available. Mean values are in the first row and median values are in the second row. All values except for debt ratio are at the year-end prior to the debt issue. Level variables are expressed in 2001 dollars. All data are obtained from COMPUSTAT.

R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335 325

While we focus on a new debt offering by an unlevered firm, it could be argued that the implications of the overinvestment control hypothesis can also be observed around other leverage increasing events such as a secondary debt issue, debt-for-equity exchange of- fer, or equity repurchase. However, in all of these events the mar- ginal impact of a change in a firm’s debt ratio on its investment policy might not be significant especially if the relation between leverage and reduction in overinvestments is not linear.

Our results for a sample of 366 debt offers by unlevered firms conducted between 1968 and 2001 strongly support the hypothe- sis that debt influences overinvestments. When unencumbered by the constraints of debt, unlevered firms retain excessive amounts of cash. The liquidity ratios of these firms exceed their industry benchmarks by approximately 20 percentage points in the interval immediately preceding a debt offering. Introducing leverage in the capital structure leads to a significant reduction in this form of overinvestment and within three years of the offering the cash ra- tios of the sample firms are lower than their benchmarks. Issuing debt also affects overinvestments in real assets but only for firms that were investing excessively before the offering. For these firms, there is a dramatic decline in abnormal capital expenditures after the introduction of leverage. Consistent with the overinvestment control hypothesis, the decline in these forms of excess invest- ments is related to the fraction of debt issued, which proxies for the degree to which debt disciplines managers.

We document a significant relation between the decline in over- investments and the interest payments associated with the new debt offering. This finding suggests that the debt service obligation disgorges cash and reduces the amount of discretionary funds under managerial control that results in reduced levels of surplus invest- ments. We also investigate the interaction between investment opportunities proxied by market-to-book ratio, overinvestments, and the role of debt in influencing this agency problem. Firms that are classified as being poorly managed with inferior investments opportunities have higher cash ratios when they are unlevered and experience a greater decline in this form of overinvestment after issuing debt relative to other sample firms. This result suggests that while debt reduces surplus investments in general, it plays an espe- cially important role in reducing excess investments in firms that have the greatest overinvestment agency problem.

For completeness, we also explore the relation between changes in overinvestments around the debt issue and corresponding changes in market value of equity. We find that a decline in abnor- mal cash ratio leads to an increase in equity value and this associ- ation is stronger for poorly managed firms. We find a similar relation between equity value and change in excess real asset investments for firms that overinvest when unlevered. These find- ings indicate that the decline in overinvestments has a positive im- pact on equity value especially for firms with high agency costs.

We test the robustness of our findings around an alternative event that also triggers a dramatic shift in a firm’s capital structure, namely elimination of long-term debt. Debt eliminations mirror debt introductions in that after recapitalization managers of firms previously constrained by debt are now free from these restric- tions. Consistent with the overinvestment control hypothesis, we document a rise in abnormal investments after firms eliminate debt. The increase is related to the growth in discretionary funds under managerial control resulting from firms retaining rather than paying to shareholders monies that was previously used to service debt obligations.

4 The definition of a debt issue is similar to Hovakimian et al. (2001) and Leary and Roberts (2005).

5 We reach similar conclusions if firms are unlevered for a minimum of five or seven years before the debt issue.

  1. Sample description and characteristics

The initial debt issuing sample is chosen from all firms listed on the Compustat database for the period 1965–2004 that are non-

regulated (other than SIC codes 4900–4999), that do not belong to the financial sector (other than SIC codes 6000–6999), and that have valid industry classification codes (other than SIC codes 9900–9999). A firm is assumed to issue debt if the change in book value of total long-term debt (data 9 + data 34) exceeds five per- cent of the pre-issue book value of assets (data 6 – total long-term debt).4 Because our test requires firms to be unlevered for an ex- tended period before the offering we restrict our sample to firms that issue debt after having no long-term debt for at least three consecu- tive years.5 To ensure that the debt financing is not temporary and that newly issued debt significantly influences overinvestments in the future, we require the firms to maintain debt of at least five per- cent of its net book assets, defined as book assets less long-term debt, for a minimum of three consecutive years immediately follow- ing the new debt offering year. Therefore, our sample only includes unlevered firms that issue debt between 1968 and 2001. We omit annual observations if the firm’s long-term debt exceeds its asset or there is no valid data for sales (data 12) or assets.

We find 366 debt issues conducted by firms that have been unlevered for at least three years immediately preceding the offering. While the frequency of debt issues is relatively stable for most of the period, there is an increase after 1994. The last seven years of the sample period accounts for approximately 40% of the observations.

The descriptive statistics for the sample firms at the year-end preceding the debt issue are presented in Table 1. Given that the sample period encompasses over three decades, we report all level variables in 2001 dollars. The average (median) book value of as- sets is approximately $153.245 ($29.60) million. The market value of assets, defined as book value of assets plus the difference be- tween market and book value of equity (data 25*199 – 60), of the average firm is $476.02 million. Average (median) market equi- ty is $432.26 ($50.85) million and average (median) sales is $217.39 ($29.50) million. The median market-to-book ratio, de- fined as market-to-book value of assets, exceeds 1.6.

326 R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335

Sample firms issue debt that is approximately 40% of its pre-is- sue book value of assets on average and the median ratio is 19.08%. These ratios suggest that unlevered firms issue a considerable amount of long-term debt and this dramatic change in capital structure is likely to significantly influence the overinvestment agency problem. The median (average) cash level (data 1) is $5.89 ($28.80) million. While the median firm does not invest in Research and Development (R&D), the average R&D expense (data 46) is $4.00 million.6 Finally, issuing firms spend $16.36 million on capital expenditure (data 128) on average.

We examine overinvestments in two types of assets; cash and real assets, which we proxy by capital expenditures. We concen- trate on these two assets because Bates (2005) and Richardson (2006) find that firms with free cash flow retain most of the surplus cash or invest excessively in real assets and that these forms of overinvestments lead to a decline in shareholders’ wealth.7 How- ever, Harford (1999), Opler et al. (1999), and Harford et al. (2008) document that firms with free cash flow also overinvest by under- taking acquisitions. We find that less than 10% of the sample firms report any acquisition activity (data 129) around the debt issue suggesting that this type of investment is relatively infrequent in our sample. Hence, in subsequent analysis we concentrate on investigating the impact of issuing debt on cash and real assets. We define cash ratio as cash and marketable securities to year- end book value of assets less cash. Investment in real assets is cap- tured by the ratio of capital expenditure to the year-end assets less capital expenditure.

Similar to Bates (2005), we determine whether firms systemat- ically overinvest by comparing the cash and capital expenditure ra- tios of sample firms in a given year to those of median industry firms in that year. Industry is defined as all firms in the same three-digit SIC code as the sample firm and does not include any sample firms. The benchmark firms are of comparable size as the sample firms. At the year-end immediately preceding the debt is- sue the average assets and sales of the matching firms are $183.18 million and $189.13 million, respectively (expressed in 2001 dollars). Our results are robust to the criteria used to create the sample of matching firms. For example, we obtain similar re- sults when we restrict matching firms in a given year to those that are in the same industry and are of similar size as the sample firms in that year, defined as having book assets that are between 25% and 200% of our firms, and then choose the median firm. We also reach similar conclusions when the matching firm is in the same industry and is closest in size to the sample firm at the year-end before the debt issue and this firm is used to adjust for industry effects in the interval around the offering.

  1. Results

3.1. Pattern of overinvestments around debt offerings

The overinvestment control hypothesis has two major implica- tions. First, in the absence of debt managers are more likely to overinvest in either cash or real assets or both. Second, the intro- duction of debt reduces free cash flow available to managers as well as disgorges existing cash thus reducing these two forms of overinvestments. We examine these implications by analyzing

6 Similar to Opler et al. (1999) and D’Mello et al. (2008), firms that do not report R&D expenditures are assumed to have zero R&D expenditures.

7 Jensen (1986), Morck et al. (1990), and Harford et al. (2008) document that firms where managers’ interests are not perfectly aligned with those of shareholders invest in negative NPV projects that lower shareholders’ wealth. Further, Harford (1999), Opler et al. (1999), Faulkender and Wang (2006), and Dittmar and Mahrt-Smith (2007) find that investors do not value firms with excess cash flows highly. Pinkowitz et al. (2006) report similar findings in an international setting.

industry-adjusted cash and capital expenditure ratios in the se- ven-year period centered on the year-end immediately following the debt issue (year 0).

The results are presented in Table 2. There are substantial dif- ferences between mean and median results suggesting that outli- ers have a considerable influence on the results. Therefore, we concentrate on median results in the discussion of univariate anal- yses and control for extreme observations in subsequent regres- sion tests.

3.1.1. Industry-adjusted cash ratios around debt offerings In the period before issuing debt, the median industry-adjusted

cash ratio (first row) is significantly positive. For example, three years before the debt offering, the cash ratio of the median sample firm exceeds its industry counterpart by approximately 25 per- centage points. The ratio declines as we approach year 0 but even at the year-end immediately preceding the debt issue the abnor- mal cash ratio exceeds 15%. We observe a dramatic decline in industry-adjusted cash ratio after the firms conduct a debt offering and the ratio becomes significantly negative two years subsequent to the debt issue. We present the time-series graph of the cash ra- tio of the median sample firm and the industry match in Panel A of Fig. 1. While the sample firm’s cash ratio drops dramatically after the debt issue that for the industry match remains relatively con- stant over the seven-year interval.

The last three columns of the table present the sample firms’ average industry-adjusted cash ratios in the three-year period be- fore (years �3 to �1) and after (years 1 to 3) the debt issue and the difference between the two ratios. We define a firm’s average cash ratio as the median industry-adjusted cash ratio over the three- year interval. We use median values to control for the impact of outliers on the results. As an alternative measure we calculate the median raw cash ratio for the three-year interval before and after the debt issue for both the sample firm and the median firm in the industry and the difference in the cash ratios between these two firms is defined as the abnormal or industry-adjusted cash ra- tios for each of the two intervals. The results for these two mea- sures are similar and we only present the results of the first measure.

In the pre-issue period, the median overinvestment in cash rel- ative to the industry benchmark is 20.31%. The median (mean) change in industry-adjusted cash ratio from before to after the is- sue is approximately �19.5 (�38.5) percentage points, significant at one percent and subsequent to the issue, the cash ratio of the sample firms is similar to the industry benchmarks.8 These findings suggest that firms maintain excessive amounts of cash when unlevered but these abnormal investments are eliminated after the introduction of debt, consistent with the predictions of the overin- vestment control hypothesis.

There might be alternative explanations for the pattern in abnormal cash ratios around a debt issue that are unrelated to role of leverage on overinvestments. For example, if firms invest the offering proceeds in real assets, there will be an increase in the book value of assets without a corresponding change in cash caus- ing the cash ratio, defined as cash divided by assets less cash, to de- cline. This possibility suggests that the observed change in cash ratios after the offering is mechanical in nature and that debt does not influence the extent to which managers overinvest.

8 We also investigate whether changes in corporate governance methods in the latter part of the sample period affects the results. We split the sample into two groups using 1994 to divide the sample because there is an increase in the number of observations beyond this year. We observe that the median decline in the pre-1995 sub-sample is 18.03% and that for post-1994 sub-sample is 25% suggesting that the pattern of declining cash ratios after the debt issue holds across time and is not affected by changes in corporate governance mechanisms.

Table 2 Industry-adjusted cash and capital expenditure ratios around new long-term debt offerings.

�3 �2 �1 0 1 2 3 Pre-Issue Post-Issue Difference

Cash ratios 55.38* 50.04* 39.58* 17.96* 10.71 10.49 11.57 49.84* 9.65 �38.48* (24.67) (21.47) (15.07) (2.43) (0.79) (�0.35) (�0.18) (20.31) (0.33) (�19.47***) [359] [359] [359] [364] [364] [365] [365] [365] [365] [364]

Capital expenditure ratios 1.83** 3.61** 2.59* 7.75vz 4.78* 2.35* 2.06* 1.26 1.67* 0.36 (�1.03) (�0.74) (�0.44) (1.00) (�0.10) (0.07) (�0.37) (�0.88) (�0.25) (0.55*) [354] [359] [361] [361] [361] [364] [362] [363] [364] [361]

The sample consists of 366 debt offerings between 1968 and 2001 by previously unlevered firms. An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years subsequent to the offering. A debt issue is deemed to have been conducted when the difference in long-term debt relative to the previous year exceeds five percent of the pre-issue book value of assets. Net asset ratio is book assets less debt. Mean and median values are in the first two rows and the number of observations is in the third row. Cash ratio is cash and marketable securities divided by book assets less cash. Capital expenditure ratio is the ratio of capital expenditure to book assets less capital expenditure. Industry adjustment is made by subtracting the ratio of the median firm in the industry, defined as all firms in the same three digit SIC code. Pre-issue (post-issue) is the three-year interval immediately preceding (subsequent) to the debt offering year (year 0). For each firm we calculate the median value over the pre-issue (post-issue) interval and the average of these values is presented in the pre- issue (post-issue) columns. The Difference column contains the difference in a variable from the post-issue interval relative to the pre-issue interval. * Indicates significance at the 10% levels, respectively. All data are obtained from COMPUSTAT. ** Indicates significance at the 5% levels respectively. All data are obtained from COMPUSTAT. *** Indicates significance at the 1% levels, respectively. All data are obtained from COMPUSTAT.

Panel A: Cash Ratio

Panel B: Cash Holdings

Fig. 1. Graphs of cash ratio (%), defined as cash divided by assets less cash (Panel A), and dollar cash holdings (Panel B) for the sample of unlevered firms that subsequently conducted debt offerings between 1968 and 2001 and the median industry matched firm for the seven-year period centered on the debt issue year (year 0). An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years subsequent to the offering. A firm has issued debt if the difference in long-term debt relative to the previous year exceeded five percent of the pre-issue book value of assets and net asset ratio is book assets less debt.

R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335 327

We investigate this explanation by analyzing the industry-ad- justed percentage change in annual cash levels as well as in cash levels from the three-year interval before to after the issue (results not tabulated).9 We find that at the year-end of the issue, the med-

9 These results and all other findings that are not tabulated are available on request.

ian annual abnormal percentage change in cash is �13.70% and cash balances continue to decline by over seven percent annually for two subsequent years. The percentage change in cash levels from the three-year interval before to that after the issue is �48.54%. We also graph the cash holdings for the median sample firm and its industry match for the seven-year period centered around the debt issue in Panel B of Fig. 1. We observe that the cash level of the median matching firm increases gradually over time while that for the sam- ple firm declines after the security issue. These results suggest that issuing debt reduces the amount of cash that a firm holds.

Another possible explanation for the pattern in cash ratios is change in accessibility to capital markets. Firms that do not have cheap and ready access to debt capital are likely to be unlevered and retain large amounts of cash to finance future investments. When access to capital markets improve, that is, when firms are able to issue debt, the need for excess liquidity declines resulting in a reduction in cash ratios. Therefore, it is not the debt offering per se but rather the access to capital markets that explains the change in cash ratios in Table 2.

We test this argument by comparing the pattern of overinvest- ments between sample firms that have greater access to capital markets and those that find it difficult to raise external financing. Acharya et al. (2007) and Faulkender and Wang (2006) argue that large firms face fewer constraints and have easier access to capital markets than small firms. These studies also argue that firms that do not have rated debt have difficulty raising external funds. If dif- ference in accessing capital market is the explanation for the pat- tern of excess cash ratios around a debt issue, we should observe large firms maintaining less cash when unlevered and experienc- ing a smaller decline in liquidity at the offering than other sample firms. Similarly, firms that do not have rated debt should have a smaller reduction in cash and a larger cash ratio subsequent to the issue relative to other firms.

We define large firms as those that have positive industry-ad- justed assets before the offering, that is, firms that are larger than their industry counterparts, and these firms are expected to have greater access to capital markets than other sample firms. Sample firms whose debt is not rated in the three-year interval subsequent to the offering are determined to have limited access to capital markets.10 We find that for the 115 firms with positive industry-ad- justed assets, the median abnormal cash ratio is 19.10% before the issue and �1.43% after the issue, a decline of 18.61 percentage points that is highly significant (results not tabulated). For firms that are

10 Debt rating information is available on Compustat beginning 1985.

13 Given our findings that there is a decline in abnormal cash holdings and no

328 R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335

classified as being constrained, the median decline in cash ratios from the interval before the debt issue to that after is 18.85%, signif- icant at 1%.11 Test statistics of differences in mean and median de- clines in liquidity between the constrained and non-constrained sub-samples are insignificant suggesting that both sub-samples experience similar decreases in abnormal cash ratios. Similarly, firms with rated debt have similar industry-adjusted cash ratios before and after the debt issue and comparable changes in these ratios as other sample firms. These findings suggest that access to capital markets is not the primary explanation for the pattern of cash ratios in Table 2.

The dramatic decline in liquidity might also be an artifact of the process of conducting a security issue and that the security issued itself is not important. An alternative explanation is that firms fi- nance investments with the sum of the offering proceeds and accu- mulated cash thus causing the excess cash ratios to decline after the offering. These arguments imply that there should be a similar decline in cash ratios after a firm issues non-debt securities. We investigate this possibility by examining the cash ratios around the sale of preferred and common stock (data 108). As with our ori- ginal sample, we restrict our attention to firms that issue stock of at least five percent of its pre-issue assets, that the offering is the first in three years, and that these firms do not conduct another equity issue for the subsequent three years. For these firms, we do not observe a significant change in industry-adjusted cash ra- tios from before to after the issue. This result suggests that the principal explanation for the pattern in cash ratio is the fact that the firm issues debt and not that it conducts a security offering.12

We also investigate why issuing debt reduces overinvestment in cash. Jensen (1986), Stulz (1990), Hart and Moore (1995), and Zwie- bel (1996) suggest that debt forces managers to service these obli- gations thus reducing the amount of cash under their control. We test this argument by examining the relation between interest pay- ments associated with the debt offering standardized by assets net of cash and the change in cash ratios of the sample firms around the issue. We find the Pearson and Spearman correlation coefficients to be significantly negative. Similarly, when we regress changes in cash ratios on interest payments the slope coefficient is signifi- cantly negative (one percent level). These results imply that new debt service obligations associated with the introduction of lever- age reduces the accumulated surplus cash ratios of sample firms.

Overall, these findings suggest that long-term debt significantly influences overinvestments in liquid assets. When firms are unle- vered, that is, when managers are free from the restrictions of debt, they retain substantially more cash than comparable industry firms. The introduction of debt disgorges excess cash by forcing managers to make interest payments, causing the firm’s ex-post liquidity ratio to be similar to its benchmark.

3.1.2. Industry-adjusted capital expenditure ratios around debt offerings

In the second row of Table 2, we examine the pattern of overin- vestment in real assets proxied by capital expenditures around the debt offering. Before the issue, the annual industry-adjusted capital expenditure ratio is similar to the benchmark in each of the three years. In the pre-issue period, the average capital expenditure of the median sample firm is 0.88 percentage points lower than the corresponding investment by benchmark firms. These findings im-

11 For this sub-sample of firms, the median (mean) abnormal cash ratios in the pre- issue and post-issue periods are 22.30 (52.11)% and 0.52 (7.93)%, respectively.

12 We examine the possibility that the sample firms coincidentally use the excess cash to initiate or increase share repurchases or dividends beginning the offering year. The median abnormal cash payout ratios are zero around the debt issue suggesting that the reduction in cash ratio cannot be explained by firms altering their payout policy.

ply that managers that do not face the disciplining role of debt do not invest in negative NPV projects.13 Thus, an examination of the role of debt in curtailing excess investments will provide limited information relevant to the overinvestment control hypothesis. In fact, the median industry-adjusted change in capital expenditure from before to after the issue is 0.55 percentage points.

While issuing debt does not influence investments in real assets in the full sample, it could play an important role for firms that have the greatest overinvestment problem. That is, debt alleviates this agency cost but only for firms that invest excessively before the issue. We test this argument by examining the pattern of abnormal investments for firms with excessive real asset invest- ments defined as those that have higher capital expenditure ratios relative to their benchmark firms in each of the two years immedi- ately preceding the debt issue.14 If issuing debt controls real asset overinvestments we should observe a dramatic decrease in indus- try-adjusted capital expenditure ratio after the offering for these firms. For all other firms, debt is not expected to impact capital expenditures because these firms are not overinvesting.

The results of our tests are presented in Table 3. There are 114 firms that are classified as overinvesting in real assets before the debt offering. For this sub-sample there is a dramatic decline in excess investments after the introduction of leverage. Abnormal capital expenditure of the median firm, which is 4.69% before the issue, declines by 2.67 percentage points subsequent to the issue. However, the median excess capital expenditure in the three years after the issue is significantly positive, implying that these firms continue overinvesting in real assets. Thus, while issuing debt re- duces abnormal capital expenditure for firms with the highest agency costs, it does not eliminate the problem.

An alternative explanation for the decline in excess investments is that industry-adjusted capital expenditure ratio is mean reverting. That is, firms with abnormally high (i.e., positive indus- try-adjusted) or low (i.e., negative industry-adjusted) capital expenditures in one period move towards the mean, which we de- fine as the benchmark firm’s capital expenditure, in the following period. This implies that the results of Table 3 can be explained by the criterion used to classify firms as overinvesting rather than by the introduction of debt in the capital structure.

We distinguish the mean reversion argument from the overin- vestment control hypothesis by examining the pattern of capital expenditure ratios of non-sample matching industry firms that have similar investments in real assets as the sample firms in the pre-issue period. For each sample firm that is overinvesting in real assets, we find a matching firm in the same industry with median raw capital expenditure ratio in the three-year pre-issue period that is closest to that of the sample firm. For each matching firm we then find the median capital expenditure ratio in the post-issue period and the change in the ratios across the two periods. Finally, we calculate the difference in the change in the capital expenditure ratios between the sample and the matched firm and average the difference across all firms. Observing a greater decline in the sam- ple firms relative to the matching firm is consistent with the hypothesis that issuing debt reduces overinvestments in firms that were investing excessively in real assets.

increase in industry-adjusted capital expenditure the question arises as to what firms do with the issue proceeds. We find that increase in raw capital expenditure in the issue year relative to the previous year accounts for 30% of the proceeds raised and change in working capital net of cash from year �1 to year 0 is about 17% of the debt issue. Interest payment at the year-end of the offer (time 0) is about 5% of the proceeds and this ratio increases to about 15% in year 3.

14 Our results are not sensitive if we classify firms that invest excessively as those that have positive abnormal capital expenditures for all three years or for a minimum of two years in the pre-issue period.

Table 3 Industry-adjusted capital expenditure ratio around new debt offerings for firms that overinvest.

Pre-issue Post-issue Difference

9.82* 4.08* �5.79* (4.69) (2.01) �2.67* 114 113 113

The sample consists of unlevered firms that conduct a long-term debt offering that had positive industry-adjusted capital expenditure ratios in the two years imme- diately preceding the debt offering year. An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years sub- sequent to the offering. A debt issue is deemed to have been conducted when the difference in long-term debt relative to the previous year exceeds five percent of the pre-issue book value of assets. Net asset ratio is book assets less debt. Capital expenditure is standardized by year-end book value of assets less capital expen- diture. Industry-adjusted capital expenditure is obtained by reducing the capital expenditure of the median firm in the industry defined as all firms in the same three-digit SIC code. Pre-issue (Post-issue) is the three-year interval immediately preceding (subsequent) to the debt issue year (year 0). For each firm we calculate the median value over the pre-issue (post-issue) interval and the average across all firms is presented in the pre-issue (post-issue) columns. The Difference column contains the difference in a variable from the post-issue interval relative to the pre- issue interval. *** Indicates significance at the 1% level. All data are obtained from COMPUSTAT.

R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335 329

We find that the median (mean) difference in capital expendi- ture ratios between the sample and matched firms is 0.01 (0.07) percentage points in the pre-issue period, indicating that both these sub-samples of firms have similar levels of overinvestments. The change in capital expenditure for the median sample firm is approximately 0.9 percentage points more negative than that for a comparable firm and in the post-issue period the raw capital expenditure of the median matching firm is about 0.5 percentage points higher than the sample firm. These results confirm our ear- lier conclusion that the introduction of debt reduces overinvest- ment for firms that ex-ante were investing excessively in real assets.

The overinvestment control hypothesis posits that leverage re- duces the amount of discretionary funds under managerial control thus lowering abnormal capital expenditures. This argument im- plies a negative relation between the interest payments associated with the newly issued debt and the change in this form of overin- vestment. Consistent with this conjecture, we find the correlation coefficients between these two variables to be significantly nega- tive but only for the sub-sample of firms that have positive indus- try-adjusted capital expenditure before the debt offering. For the full sample, the correlation is positive but insignificant.

Overall, the examination of the capital expenditure ratios around new debt issues yields the following conclusions: Firms, on average, do not overinvest in real assets when the disciplining role of debt is missing. For firms that do overinvest, debt reduces but does not eliminate abnormal capital expenditures. The reason for the reduction is the debt service obligations that reduce the amount of unrestricted funds that is available for overinvesting in real assets.

3.2. Future growth opportunities and the overinvestment control hypothesis

We also investigate the impact of future growth opportunities on the role of debt in controlling overinvestments. Previous studies suggest that firms that are poorly managed with non-positive investment opportunities are more likely to overinvest.15 In the

15 See Harford (1999), Opler et al. (1999), Pinkowitz and Williamson (2004), and Faulkender and Wang (2006).

context of this paper, the argument implies that these firms will have higher industry-adjusted cash and capital expenditures ratios before the debt issue and a greater reduction in these forms of overinvest- ments after the introduction of debt relative to other sample firms.

We test this hypothesis by classifying firms into two groups rel- ative to the industry using the market-to-book ratio as a proxy for the quality of investment opportunities. Firms that have negative industry-adjusted market-to-book ratio in the two years immedi- ately before the issue year are classified as being poorly managed firms with negative NPV investment opportunities compared to the industry benchmark (IMBR < 0). We classify all other firms as being well managed and having good investment opportunities (IMBR P 0). To the extent that firms with relatively poor invest- ment opportunities, that is, firms with negative industry-adjusted market-to-book ratio in only the year immediately before the is- sue, are classified as being well managed, this classification scheme biases the results against the overinvestment control hypothesis.

We present the results in Table 4. We classify 154 of the sample firms as being poorly managed with negative NPV projects in the future. For these firms, the median cash ratio before the debt issue is 29.67%. For other firms in the sample, the median cash ratio is 18.06% implying that even firms that are not classified as being poorly managed but that are free from the restrictions of debt maintain abnormal amounts of cash. The difference between the two sub-samples is significant suggesting that poorly managed firms maintain more excess cash and thus have greater agency costs than other firms.

Subsequent to the issue there is a dramatic decline in cash ra- tios for both sub-samples of firms. The median decline for firms classified as being poorly managed is 21.28 percentage points and this is significantly more negative than the 17.88 percentage points decline for the other sub-sample of firms. We also compare the industry-adjusted percentage change in cash levels from before to after the issue for the two sub-samples. We find that the median decline for the sub-sample of poorly managed firms is 55.36% and this is marginally more negative than the 42.62% for the other firms in the sample. In the post-issue period, the cash ratios of both sub-samples of firms are similar to their industry benchmark firms.

These results indicate that while unlevered firms retain exces- sive amounts of cash before issuing debt, the problem is greater for firms that are poorly managed. Introducing leverage leads to a reduction in this overinvestment for both sub-samples but the decline is greater for firms with poor investment opportunities. Thus, while debt reduces this form of agency costs in general, it plays an especially important role for poorly managed firms. This finding supports Harvey, Lins, and Roper’s (2004) conclusion in emerging markets.

In Panel B, we compare the industry-adjust capital expenditure ratios as well as the change in the ratio from before to after the is- sue for the two sub-samples of firms. Before the offering when firms are not subject to the disciplining role of debt, there is no evi- dence that firms with poorly managed invest more on capital expenditures than their industry counterparts or than the sub- sample of firms with good management. In fact, the industry-ad- justed ratio is significantly negative and it is lower than the ratio for the sub-sample of firms that are classified as being well managed.

Subsequent to the offering, the median industry-adjusted ratio for firms with good investment opportunities is positive and signif- icantly higher than for firms with market-to-book ratios less than the benchmark. This result suggests that well-managed firms use the proceeds of the debt issue to finance positive NPV projects. For firms with negative market-to-book ratio, the median indus- try-adjusted change in real asset investments is significantly posi- tive, which in contrary to the prediction of the overinvestment control hypothesis.

Table 4 Industry-adjusted cash and capital expenditure ratios for firms classified by market- to-book ratio.

Pre-issue Post-issue Difference

Panel A: cash ratios IMBR < 0 67.12* 11.07* �52.09***

(29.67) (0.49) (�21.28) [154] [154] [153]

IMBR P 0 37.23* 8.61 �28.61*** (18.06) (�0.26) (�17.88) [211] [211] [211]

t-Test 2.57** 0.46 2.11**

Wilcoxon Z (1.96) (0.34) (1.69)

Panel B: capital expenditure ratios IMBR < 0 0.13 0.84 0.59

(�1.78*) (�0.65) (0.75) [154] [154] [153]

IMBR P 0 2.07* 2.27* 0.20 (�0.09) (0.37***) (0.31) [209] [210] [208]

t-Test 1.61 1.60 0.31 Wilcoxon Z (4.13) (2.83) (1.49)

The sample consists of 366 debt offerings between 1968 and 2001 by previously unlevered firms. An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years subsequent to the offering. A debt issue is deemed to have been conducted when the difference in long-term debt relative to the previous year exceeded five percent of the pre-issue book value of assets. Net asset ratio is book assets less debt. Cash ratio is cash and marketable securities divided by book assets less cash. Capital expenditure ratio is the ratio of capital expenditure to book assets less capital expenditure. Market-to-book ratio (MBR) is defined as book value of assets plus the difference between market and book values of equity divided by book assets. Industry adjustment is made by subtracting the ratio of the median firm in the industry, defined as all firms in the same three digit SIC code. IMBR < 0 contains firms that had negative industry-adjusted MBR in each of the two years immediately preceding the debt offering year. All other firms are classified as IMBR P 0. Pre-issue (post-issue) is the three-year interval immediately preceding (subsequent) to the debt issue year (year 0). For each firm we calculate the median value over the pre-issue (post-issue) interval and the average across all firms is presented in the pre-issue (post-issue) columns. The Difference column contains the difference in a variable from the post-issue interval relative to the pre- issue interval. * Indicates significance at the 10% levels, respectively. All data are obtained from COMPUSTAT. ** Indicates significance at the 5% levels, respectively. All data are obtained from COMPUSTAT. *** Indicates significance at the 1% levels, respectively. All data are obtained from COMPUSTAT.

330 R. D’Mello, M. Miranda / Journal of Banking & Finance 34 (2010) 324–335

3.3. Multivariate regression analysis

We also examine the overinvestment control hypothesis in a multivariate framework. Initially, we test the implication that in the absence of the disciplining role of debt firms overinvest in cash. We do so by estimating the following regression for the sample of debt issuing firms and their corresponding benchmarks:16

CRi ¼ a0 þ b1 � ðDODUMiÞ þ b2 �MBRi þ b3 � lnðASTiÞ þ b4 � CFRi þ b5 �NWCRi þ b6 � CEXPRi þ b7 � STDEVi þ b8

� RDSi þ b9 � DDUMiþ b10 � XN

m¼1 ðTPDUMmÞ þ b11

� XT

q¼1 IDUMq þ eI ð1Þ

where CR is the firm’s cash ratio, DO DUM is a dummy variable that takes on the value of 1 if the previously unlevered firm conducts a debt offering and 0 otherwise, MBR is the market-to-book ratio, Ln(AST) is the natural log of book assets, CFR is the cash flow ratio, NWCR is the net working capital ratio, CEXPR is the capital expendi- ture ratio, STDEV is the standard deviation of cash flow of the med- ian firm in the industry in the previous five years, RDS is research and development expense to sales ratio, DDUM is a dummy variable if the firm pays dividends, TP DUM is a time period dummy for each five-year interval beginning in 1968, N is the number of five-year intervals, and IDUM is a dummy variable for each industry based on the one-digit SIC code where T is the number of industries.17

We introduce a time period dummy because the distribution of debt offerings in our sample is not constant across time suggesting that the interval when a firm issues debt might play an important role and hence must be controlled for. Additionally, Jensen (1986) and Servaes (1994) find that certain industries are more likely to experience the overinvestment problem thus requiring us to con- trol for industry effects. For each firm, the regression variables other than the dummy variables are the median values over the three-year interval immediately preceding the debt offering but we reach similar conclusions if we use year �1 variables.

We present the results in column (1) of Table 5. The coefficient for DO DUM is significantly positive. This result indicates that after controlling for other factors, unlevered firms maintain cash ratios that exceed their benchmark firms by 30.6 percentage points on average in the interval before the debt offering. This result confirms our earlier findings that firms that are not subject to the disciplining role of debt overinvest in cash.

Next, we test the second major implication of the overinvest- ment control hypothesis that the introduction of debt directly reduces abnormal investments. We do so by estimating the regres- sion similar to (1) but all variables other than the dummy variables are expressed as changes from the three-year interval before to after the debt offering and are adjusted for industry effects.18

Therefore, for example, the dependent variable is the abnormal change in the cash ratio defined as the change in cash ratio of sample firms less that of benchmark firms.

If debt directly restricts managers’ propensity to overinvest, there should also be a relation between the fraction of debt issued and the decline in excess cash ratios. We therefore add an indepen-

16 This regression is similar to specification 4 in Table 4 of Opler et al. (1999). We omit the regulation dummy because regulated firms do not form a part of our final sample. We control for outliers by using the Cook’s D test that eliminates data points that have an excessive influence on the results.

17 The last period contains debt offerings conducted between 1998 and 2001, a period of only four years.

18 Measuring change from year �1 to year +1 yields similar conclusions. Because we use industry-adjusted variables DO DUM and STDEV are eliminated from the regression.

dent variable, Debt Issued, defined as the median debt ratio after the offering and this captures the disciplining role of newly issued debt. We also investigate whether the ability of debt to reduce overinvestment is more valuable to poorly managed firms with few valuable investment opportunities. To do so we introduce a dummy variable IMBR DUM, which takes on the value of 1 if the firm’s industry-adjusted market-to-book ratio is negative in the two years immediately before the offering and 0 otherwise and also interact this variable with the fraction of debt issued (IMBR DUM * Debt Issued).

The regression results are presented in columns (2) and (3). The coefficient for Debt Issued is negative and significant indicating that the introduction of leverage directly leads to a reduction in firms’ abnormal cash ratios. The IMBR DUM variable is also signif- icantly negative implying that firms with high agency costs before the offering experience a greater decline in excess cash ratios than other sample firms. Furthermore, the decline in abnormal cash ra- tios for these firms is related to the new debt issued, which sug- gests that debt plays an especially important role in reducing cash overinvestments for firms classified as being poorly managed.

We also test whether our sample firms overinvest in real assets relative to the industry benchmark by estimating the following regression:

Table 5 Regression results of raw cash ratio and industry-adjusted changes in cash ratio around debt introductions.

Cash ratio Industry-adjusted change in cash ratios

(1) (2) (3)

Intercept 0.223 �0.426 �0.471 (0.012) (0.099) (0.080)

DO DUM 0.306 (<0.001)

Debt issued �0.173 �0.132 (0.003) (0.036)

MBR 0.062 (<0.001)

IMBR DUM �0.115 (0.045)

IMBR DUM*Debt Issued �0.190 (0.024)

Ln(Assets) �0.003 �0.006 0.021 (0.708) (0.862) (0.476)

CFR 0.562 �0.425 �0.395 (<0.001) (<0.001) (<0.001)

NWCR �0.298 �0.293 �0.281 (<0.001) (<0.001) (<0.001)

CEXPR �0.655 �0.978 �0.992 (<0.001) (<0.001) (<0.001)

STDEV 0.288 (0.521)

RDSR 0.037 �0.042 �0.038 (0.414) (0.367) (0.412)

DDUM �0.041 0.012 �0.021 (0.114) (0.836) (0.710)

IDUM NR NR NR TP DUM NR NR NR N 620 294 294 Adj. R2 (%) 53.87 28.11 26.30

The sample consists of unlevered firms that subsequently conducted debt offerings between 1968 and 2001 and the matching firms defined as median firms in the same three-digit SIC code. An unlevered firm is defined to have conducted a debt offering if it issues long-term debt after three years of no debt and maintains a long-term debt to net asset ratio of five percent for three years subsequent to the offering. A firm has issued debt if the difference in long-term debt relative to the previous year exceeded five percent of the pre-issue book value of assets and net asset ratio is book assets less debt. Cash ratio, CR, is cash and marketable securities divided by book assets less cash. DO DUM is a dummy variable that takes the value of 1 if the sample firm conducts a debt offering and 0 otherwise, debt issued is the change in the long-term debt to net asset ratio from before to after the offering, MBR is the Market-to-Book ratio, defined as book value of assets plus the difference between market and book value of equity divided by book assets, IMBR is a dummy variable that takes the value 1 if the firm’s MBR is less that the industry benchmark in the two years immediately preceding the debt offering and 0 otherwise, Ln(assets) is the natural log of book value of assets less cash, CFR is the cash flow ratio defined as earnings before depreciation and amortization less interest, taxes, and preferred and common dividends standardized by assets less cash, NWCR is net working capita

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Finish Essay Questions with A+++++work

Finish Essay Questions with A+++++work

Essay Questions

1

QUESTION – Essay Questions

we discussed agency problems between shareholders and managers and a couple of methods to control / reduce the agency costs. Choose two academic papers from either Journal of Corporate Finance or Journal of Banking and Finance (available electronically through the library’s website) which discussed how corporate governance mechanism / practice helps to reduce the agency problem and therefore, could potentially improve firm performance.

complete the following tasks for Question

  1. Scholarly Skills (20 marks):
    For each paper, write a brief summary of data, methodology and findings.

(Word limit: Each summary should be a maximum 2 pages).
· Each paper should be published after year 2000.

· Each paper should be from either Journal of Corporate Finance or Journal of Banking and Finance

· In your own words, briefly describe the control mechanism examined in each paper. (Word limit: 150 words for each paper)

Hints:

· It would be easier to choose a paper that focuses on examine one or two corporate governance mechanism. However, this is not a requirement.

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Psychotherapy for personality disorders

Psychotherapy for personality disorders

Correspondence: Alexander Chapman, PhD, Department of Psychology, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 4Z1 Canada. Tel: (778) 782-6932. Fax: (778) 782-3427. E-mail: alchapma@sfu.ca

(Received 7 April 2011 ; accepted 5 May 2011 )

Psychotherapy for personality disorders

KATHERINE L. DIXON-GORDON , BRIANNA J. TURNER & ALEXANDER L. CHAPMAN

Department of Psychology, Simon Fraser University, Burnaby, British Columbia, Canada

Abstract Personality disorders are widely prevalent among those seeking mental health services, resulting in substantial distress and a heavy burden on public assistance and health resources. We conducted a qualitative review of randomized controlled trials (RCTs) of psychosocial interventions for personality disorders. Articles were identifi ed through searches of electronic databases and classifi ed based on the focus of the psychological intervention. Data regarding treatment, participants and outcomes were identifi ed. We identifi ed 33 RCTs that evaluated the effi cacy of various psychosocial treatments. Of these studies, 19 focused on treatment of borderline personality disorder, and suggested that there are several effi cacious treat- ments and one well-established treatment for this disorder. In contrast, only fi ve RCTs examined the effi cacy of treatments for Cluster C personality disorders, and no RCTs tested the effi cacy of treatments for Cluster A personality disorders. Although other personality disorders, especially Cluster A, place heavy demands on public assistance, and in spite of recommendations that psychosocial interventions should be the fi rst line of treatment for these disorders, our review underscored the dearth of treatment research for many of these personality disorders. We highlight some obstacles to such research and suggest directions for future research.

Introduction

According to the DSM-IV, personality disorders (PDs) are defi ned as pervasive, non-normative patterns of thought and behaviour which are long- standing, and cause signifi cant impairment in rela- tionships and overall functioning (APA, 2000, p. 685). The DSM-IV includes ten PDs, organized into three clusters: Cluster A disorders, comprising schizoid, paranoid and schizotypal PDs, are charac- terized by odd or eccentric patterns of behaviour; Cluster B disorders, comprising antisocial, border- line, narcissistic and histrionic PDs, are character- ized by dramatic or impulsive patterns of behaviour; and Cluster C disorders, comprising avoidant, dependent, and obsessive – compulsive PDs, are char- acterized by anxious or fearful behaviours. PDs are highly prevalent, with 31 – 45% of psychiatric patients and 10 – 15% of the general adult population meeting criteria for at least one PD (Samuels et al., 2002; Zimmerman & Coryell, 1989).

Personality disorders are associated with substan- tial personal and interpersonal distress, functional impairment, and use of mental health resources (Perry, 1993; Perry & Vaillant, 1989; Skodol, Johnson, Cohen, Sneed, & Crawford, 2007). In fact,

individuals with PDs make up a substantial portion of mental health service consumers (Fyer, Frances, Sullivan, Hurt, & Clarkin, 1988; Markowitz, Moran, Kocsis, & Frances, 1992; Oldham, Skodol, Kellman, & Hyler, 1995; Skodol et al., 1993; Vaughn et al., 2010). Further, early literature documenting limited gains in psychotherapy among individuals with PDs compared to those without PDs (Diguer, Barber, & Luborsky, 1993; Fahy, Eisler, & Russell, 1993; Hardy et al., 1995; Karterud et al., 1992; Shea, Pilkonis, Beckham, & Collins, 1990; Woody, McLellan, Luborsky, & O ’ Brien, 1985) fuelled the assumption that individuals with personality disor- ders may be ‘ untreatable ’ (Lewis & Appleby, 1988).

Although people who hold this assumption have been taken to task with the emergence of mounting evidence for the effi cacy of treatments for PDs, PDs are associated with signifi cant challenges for psycho- therapy. For example, interpersonal, self and identity dysfunction are often hallmark features of various PDs (Livesley, 2003); thus, it is not surprising that the formation and maintenance of a positive working alliance can be a challenging endeavour (Benjamin & Karpiak, 2002; Colson et al., 1985; Muran, Segal, Samstag & Crawford, 1994). Individuals with PDs

International Review of Psychiatry, June 2011; 23: 282–302

ISSN 0954–0261 print/ISSN 1369–1627 online © 2011 Institute of Psychiatry DOI: 10.3109/09540261.2011.586992

Psychotherapy for personality disorders 283

often present to therapy with a variety of challenging behaviours that require attention, including sub- stance use, eating disorders, self-injury, suicidality, and violent or aggressive behaviour (Grant et al., 2004). Moreover, patients with particular PDs pres- ent to treatment with an average of roughly three co-occurring Axis-I disorders (Harned et al., 2009; McMain et al., 2009), making it diffi cult to defi ne and prioritize treatment targets, and to ascertain meaningful ‘ progress ’ . The clinical complexity of these patients can lead to distress, demoralization and burn-out on the part of therapist (Chapman, 2009; Rossberg, Karterud, Pedersen, & Friis, 2008). Individuals with PDs are also more likely to prema- turely terminate therapy compared to those without PDs (Karterud et al., 1992; Skodol, Buckley, & Charles, 1983). Thus, it is not surprising that work with these individuals is sometimes marked by frus- tration on the part of both therapist and patient regarding the rate of therapeutic progress (Murphy & McVey, 2010; Watts & Morgan, 1994).

Research indicates that many mental health pro- fessionals hold a variety of negative beliefs about individuals with PDs, including, for example, that these patients are challenging, attention-seeking, manipulative and even ‘ annoying ’ (Cleary, Siegfried, & Walter, 2002; Fraser & Gallop, 1993; Gallop, Lancee, & Garfi nkel, 1989; James & Cowman, 2007; Lewis & Appleby, 1988). Further, many mental health professionals believe that patients with PDs are less likely to respond to intervention, more likely to pose challenges for clinical management, and are less deserving of mental health resources than indi- viduals without personality disorders (Lewis & Appleby, 1988). Such negative beliefs about indi- viduals with PDs are associated with less empathic and respectful responses, use of punitive sanctions and an overall reduction in adherence to reasonable standards of care (Bowers, 2002; Fraser & Gallop, 1993; Gallop et al., 1989; Watts & Morgan, 1994). Thus, prior to the last 20 years or so, the initial pic- ture regarding psychotherapy for PDs looked gloomy indeed: not only did research suggest that individuals with PDs were among the most treatment resistant patients, but also some clinicians took these fi ndings to heart and often responded to these patients with hopelessness or negativity.

Despite this worrisome beginning, recent evidence supports a much more optimistic outlook regarding the effi cacy and effectiveness of psychotherapy for individuals with personality disorders. In fact, a range of psychosocial treatments seem to be associ- ated with positive outcomes among those with PDs (Livesley, 2003). One review of 15 psychotherapy outcome studies revealed large effect sizes for self- and observer-rated outcomes in both naturalistic and randomized, controlled trials (RCTs) examining

psychotherapy for a variety of PDs (Perry, Banon, & Ianni, 1999). Further, a meta-analytic review of psychotherapy for individuals with Cluster C disorders revealed that these patients signifi cantly improve with cognitive behavioural therapy, psycho- dynamic therapy and social skills training, and these treatment gains are often main tained into follow-up periods of 3 months to 3 years (Simon, 2009). Finally, several RCTs using varied modes and styles of therapy have revealed promising improve- ments with psychotherapy for individuals with PDs (Arnevik et al., 2009; Bateman & Fonagy, 1999, 2008; Giesen-Bloo et al., 2006; Linehan et al., 2006; Svartberg, Stiles, & Seltzer, 2004). Given the evidence that hopelessness or pessimism regarding the ability to treat PDs can negatively impact the care that these patients receive (Bowers, 2002; Gallop et al., 1989; Fraser & Gallop, 1993; Watts & Morgan, 1994), it is crucial that mental health professionals familiarize themselves with this devel- oping literature.

Evaluating psychotherapy

Over the past several decades, increasing attention and effort has been directed toward understanding whether psychotherapy works. To address this ques- tion, researchers undertook a scientifi cally rigorous examination of the effects of psychotherapy for numerous mental disorders, with accumulating evi- dence pointing to positive effects for a variety of therapies (Smith & Glass, 1977). In 1995, Division 12 (Clinical Psychology) of the American Psycho- logical Association began a Task Force on Promo- tion and Dissemination of Psychological Procedures and a Task Force on Psychological Intervention Guidelines in order to further understand and promote the scientifi c support for psychological interventions. A few years later, Chambless and Hollon (1998) published comprehensive guidelines for established that a particular therapy is ‘ empiri- cally supported ’ . Briefl y, Chambless and Hollon (1998) note that, in order to be considered effi ca- cious, a therapy must have been shown to be benefi – cial in at least two carefully controlled studies. Specifi cally, the authors recommend putting the greatest weight on evidence derived from random- ized, controlled trials (RCTs), or trials in which par- ticipants are randomly assigned to receive the therapy in question or to a comparison condition (e.g. wait- ing list, treatment as usual, etc.), with the next great- est weight going to carefully controlled single-case or group experiments. In contrast, uncontrolled studies do not have comparison groups, and non- randomized studies involve non-random assignment to treatment conditions. Studies conducted as RCTs provide the strongest evidence that the observed

284 K. L. Dixon-Gordon et al.

effects are due to the therapy in question, and not to other confounding or common factors. Further, to reduce potential allegiance effects, evidence of a therapy ’ s benefi ts must be found by at least two inde- pendent researchers. If only one study is available to support the therapy or if the studies have all been conducted by the same research team, the therapy may be considered ‘ possibly effi cacious ’ . Chambless and Hollon (1998) also outline a number of metho- dological considerations that should be evaluated in order to determine that the data is of suffi cient qual- ity as to ensure confi dence in the conclusions, and provide guidelines for evaluating effi cacy when there are confl icting results.

In addition to evaluating a treatment ’ s effi cacy, Chambless and Hollon (1998) recommend the consideration of two other criteria: specifi city and effectiveness. To be considered specifi c, the therapy must be effi cacious and must demonstrate superior effects when compared with a control condition that incorporates the nonspecifi c processes of psycho- therapy, such as warmth, attention, expectation of change, and therapeutic rituals and rationales, among other factors (Wampold et al., 1997). A common way to evaluate specifi city is to compare the psycho- therapy under consideration to a ‘ treatment as usual ’ condition, often defi ned as treatment by existing programmes or resources in the community. A more stringent test of specifi city is to compare the therapy against another bona fi de or manualized treatment. For a therapy to be considered effective, a treatment must be shown to produce benefi ts in ‘ the real world ’ of clinical practice, where many of the stringent controls that characterize RCTs may not be present. In addition, Chambless and Hollon (1998) recommend that researchers and clinicians attend to the generalizability, feasibility and cost- effectiveness of therapy in clinical practice.

In this paper, we provide a review of the empirical literature evaluating psychotherapy for PDs. Using PsycINFO and Google Scholar, we searched for papers using the following key words on their own and in combination: personality disorder, Cluster A, Cluster B, Cluster C, psychotherapy, intervention, treatment, randomized controlled trial. Specifi cally, we have focused our review on evidence gleaned from randomized, controlled trials (RCTs) (see Table I). We excluded treatments developed for co-occurring diagnoses (e.g. treatments developed for an Axis I disorder and co-occurring PD). Where no RCTs were found, however, we provide a brief review of uncontrolled or case studies. Although not reviewed here, it is important to note that a wealth of naturalistic and case studies have evaluated therapy outcomes in PDs, also suggesting promise for various psychological approaches.

Evidence-based treatments for personality disorders

Unlike the Axis I psychotherapy literature, which often focuses on the evaluation of the effi cacy and effectiveness of particular therapeutic approaches within discrete diagnostic groups (e.g. CBT for depression, prolonged exposure for PTSD), much of the literature on psychotherapy for Axis II disorders examines the effi cacy of a therapeutic approach for individuals who meet criteria for a range of PDs. This approach makes intuitive sense, given that PDs have high rates of co-occurrence with other PDs (Conklin & Westen, 2005; Critchfi eld, Clarkin, Levy, & Kernberg, 2008; Hillbrand, Kozmon, & Nelson, 1996; Zanarini et al., 1998) and with Axis-I pathology (Skodol et al., 2002b; Zanarini et al., 1998). One notable exception to this trend is the case of borderline personality disorder (BPD), for which specialized treatment approaches have been devel- oped. Studies evaluating treatments to reduce crim- inal recidivism often include substantial proportions of individuals with antisocial personality disorder (ASPD), given the high prevalence of ASPD in offender populations (Hart & Hare, 1989); however, few studies have evaluated the treatment of ASPD specifi cally, and few studies of offender treatment explicitly separate fi ndings for those with ASPD versus those without (Duggan, Huband, Smailagic, Ferriter, & Adams, 2007). A few studies have also evaluated the effi cacy of psychotherapy for Cluster C disorders. Thus, we will fi rst review the evidence for the effi cacy of psychotherapy for per- sonality disorders in general; next, we present a review of the effi cacy of therapeutic approaches that have been developed to target-specifi c PDs.

Randomized controlled trials for mixed personality disorders

After a review of the empirical literature, we identifi ed six RCTs that have examined the effi cacy and specifi city of psychotherapy for mixed PDs (cf. Duggan et al., 2007). Across studies, the most common personality disorder diagnoses included borderline (24.4 – 44.4%), avoidant (5.4 – 40.3%), and obsessive – compulsive (16.2 – 37%). Less fre- quent diagnoses included schizotypal, schizoid, dependant, histrionic, antisocial, and narcissistic PDs, although there was considerable variability across studies. Among these studies, psychodynamic therapies were the most frequently examined thera- peutic approach.

Of these studies, two utilized waiting list control conditions (Huband, McMurran, Evans, & Duggan, 2007; Winston et al., 1994). In the fi rst

Psychotherapy for personality disorders 285 T

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Personality Disorders Over Time: Implications for Psychotherapy

Personality Disorders Over Time: Implications for Psychotherapy

JOEL PARIS, M.D.

Personality disorders have an early onset, and are associated with dysfunction over the course of adult life. Antisocial and borderline personality disorders tend to remit with age, hut other categories do not usually show improve- ment. The chronicity of personality disorders is hoth a challenge and a frame for treatment planning. Psychotherapy for these patients can focus on rehabilitation and the development of social niches that match their person- ality profiles.

THE NATURE OF PERSONALITY DISORDERS

Patients with personality disorders are common in clinical practice (51). But this population presents a number of difficulties for effective treatment (17,29). These conditions are associated with strikingly low levels of functioning (23,44). Moreover, by definition, personality disor- ders begin early in development and go on to have a chronic course (1).

This degree of chronicity and dysfunction requires an explanation. It has long been assumed that “deep-seated” problems must originate in early childhood, and that problems present for years require years of therapy. This point of view has led to therapeutic approaches designed to discover and repair conflicts arising in early development.

However, recent evidence suggests that these etiological assumptions are, at least in part, mistaken. In medicine, diseases that begin early in life and go on to chronicity tend to be associated with higher genetic vulner- ability (7), and similar principles apply to most mental disorders (25). Behavioral genetic studies show that about half the variance affecting personality traits (12), as well as personality disorders themselves (46), is accounted for by genetic factors. There is strong evidence that personality disorders are rooted in heritable traits that reflect temperament (40,43,29).

However, these findings do not mean that personality disorders are

Professor of Psychiatry, McGill University. Mailing address: Institute of Community and Family, Psychiatry, 4333 chemin de la cote Ste. Catherine, Montreal, Quebec, H3T 1E4, Canada, e-mail: joel.paris@mcgill.ca

AMERICAN JOURNAL OF PSYCHOTHERAPY, Vol. 58, No. 4, 2004

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purely genetic, or that their causes lie only in “chemical imbalances.” Environmental factors, most particularly childhood adversities, are also important (13). These risk factors have been most consistently identified in research on antisocial personality (38) and on borderline personality (50).

The real issue is that the impact of adverse events can only be understood in interaction with temperament. This principle is supported by research showing that in most cases, childhood trauma does not lead to pathological sequelae (41). In general, life events have greater effects on those who are vulnerable (25). The development of a diagnosable person- ality disorder depends on a complex combination of genetic and environ- mental factors, which are best formulated in a stress-diathesis model (22,25).

PRECURSORS, COURSE AND OUTCOME OF PERSONALITY DISORDERS

Personality disorders do not arise in adulthood de novo. These condi- tions have a continuous relationship with normal personality traits (17), and differences are only a matter of degree. These trait profiles also reflect patterns of vulnerability that can be identified prior to the onset of a diagnosable disorder.

Although personality disorders may only be present clinically at ado- lescence, they usually have childhood precursors. The best documented example concerns antisocial personality, for which conduct disorder is an established precursor (38). Patients who later develop borderline person- ality may also have had difficulties during childhood, probably a combi- nation of externalizing and internalizing symptoms (27). Patients who develop avoidant personality disorder in adulthood may have been unusu- ally shy (“behaviorally inhibited”) as children (14,25). Finally, patients who develop schizoid or schizotypal personality disorders may show similar symptoms during childhood (48).

Childhood precursors reflect temperamental variations that shape trait profiles, and temperament also explains why personality is highly stable over the life course (18). But traits do not, by themselves, lead to psychopathology. Disorders require an amplification of traits to dysfunc- tional proportions, a process strongly affected by environmental factors. For this reason, one can conceive of reversing the process in therapy, bringing patients back from personality pathology to temperamental bed- rock.

By adolescence, one sees fairly typical cases of personality disorder (15). While specific categories tend to be unstable, diagnostic shifts usually fall

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within the Axis II clusters, and patients remain symptomatic in young adulthood (5). Over the course of adulthood, personality disorders are chronic but not necessarily continuous. They often show a waxing and waning pattern marked by improvements and exacerbations (8). In pro- spective studies of borderline personality, some patients even seem to “remit,” in the sense that they no longer meet criteria for a category; however most still have low levels of functioning (44) and continue to merit an overall diagnosis of personality disorder.

The long-term outcome of personality disorders varies by category. The diagnoses in Cluster B of Axis II show the most improvement. For example, many patients with antisocial personality disorder (ASPD) no longer meet criteria by middle age. But they continue to have problems in interpersonal relationships, consistent with an overall diagnosis of person- ality disorder (6). Thus, while antisocial patients are less likely to commit crimes in later life, they continue to be poor spouses, inadequate parents, and unsteady workers. A quarter of them will die prematurely. These findings support the caution of most clinicians about treating these patients.

The prognosis of borderline personality (BPD) is much better (28). If one defines recovery as attaining close-to-normal functional status and no longer meeting diagnostic criteria for the disorder, then we can say that most patients achieve that recovery. While in naturalistic studies (36), little improvement is seen at five-year follow-up. However, striking degrees of recovery have been documented at 15-year follow-up (19,45,29,35): by age 40, most patients are doing reasonably well, i.e., attaining scores over 60 on global assessment of functioning, and with only 25% still meeting BPD criteria. After 27 years (at a mean age of 50), only 8% still meet BPD criteria) and mean global functioning scores are still over 60 (31). Thus, therapists can be reasonably optimistic, at least in the long-term, when taking on these patients.

A recent report from Zanarini et al. (50) documented a more rapid improvement (although not full recovery) in BPD patients followed over six years. An ongoing NIMH longitudinal study (9) followed patients in four categories (borderline, schizotypal, avoidant, and compulsive) and reported similar results. The findings showed remission from Axis II disorder (8), although most continued to have functional impairment (44).

These findings seem to suggest that patients with personality disorders can improve naturalistically, independent of treatment. However, thera- pists tend to focus their efforts on more severely dysfunctional sub- populations, and these patients are less likely to get better with time (52).

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Moreover, more rapid improvement may occur in research subjects who accept regular follow-up evaluation and who stay in long-term treatment. Given the natural sifting process of clinical practice, in which many patients drop out, those who stay in therapy may do somewhat better than those who do not.

But these patterns of improvement have a “down side.” About 25% of recovered patients with BPD still suffer from chronic mood symptoms (31). Improvement in Cluster B disorders seems to be mainly related to decreases in levels of impulsivity, while affective symptoms are more likely to continue (29). Also, the overall rate of completed suicide in naturalis- tically followed BPD samples is close to 10% (45,29), and there is also an unusually high rate (8%) of death from natural causes (31). Nonetheless, most patients with BPD recover, even after long periods of chronic suicidality.

The age at which suicide occurs is clinically important. The mean age at completion is 30 at 15-year follow-up (45), and 37 at 27-year follow-up (31). Thus, suicide completions in BPD usually take place relatively late in the course of the illness, not in the early 2O’s when patients show the highest rates of suicidal threats and attempts (30). While most patients do not commit suicide, this outcome is most likely to occur when patients despair after years of unsuccessful treatment.

There is only a small amount of data on the outcome of other personality disorders. In Cluster A disorders, such as schizotypal person- ality, one rarely sees remission (20). Patients with Cluster C personality disorders also tend to remain dysfunctional over time (42,37). While some studies point to improvement in narcissistic personality (34,39), the data are derived from patients hospitalized for depression, a sample that is not representative of clinical practice. For most narcissistic patients, the prognosis must be guarded (14a).

A REHABILITATIVE STRATEGY EOR TRAIT MODIFICATION IN PATIENTS WITH PERSONALITY DISORDERS

In chronic disorders, therapy needs to have realistic goals. In person- ality disorders, the goal of treatment can be rehabilitation rather than “cure”.

While there is overall evidence for the efficacy of psychotherapy in patients with personality disorders (32), results vary by category. Several studies (11,47,45a) have shown that patients with Cluster C disorders can respond to either dynamic or cognitive therapy. However, most research has focused on BPD. Many borderline patients receive pharmacotherapy,

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but the results can best be described as ameliorative (24). On the other hand, the evidence for the efficacy of psychotherapy is strong (29).

Several approaches to the psychotherapy of BPD have been tested empirically. The most extensive research is on dialectical behavior therapy (DBT), which has been shown to be effective for parasuicidal behaviors over a year of treatment (16), although we do not know whether DBT changes long-term course. Psychodynamic therapy, specifically “mental- ization based treatment” (3), has also been shown to be effective in BPD, at least within the context of day treatment (2) and other types of dynamic therapy also have proven effectiveness in this context (33). Schema therapy (49), a mixture of cognitive and dynamic therapy, is currently being exposed to clinical trials.

The question is whether these methods can be applied to the ordinary practice of psychotherapy. These approaches have been tested in special- ized treatment programs that are expensive and not always available. Therapists require a set of methods that they can apply in their offices. For this reason, several authors have recommended practical approaches to the therapy of personality disorders that are at least consistent with existing empirical data (10,17,26,29).

The method suggested here can best be described as rehabilitative. It stands on three general principles. First, since personality traits are stable over time, therapists need not attempt to achieve radical change; it is sufficient to help patients to reach a better level of functioning. Second, the chronic course of personality disorders means therapists should set real- istic goals, with scaled down expectations, seeing small gains as significant victories. Third, patients need to focus less on their past, and more on the way they feel, think and behave in the present. When patients can reflect and identify current problems, they are more likely to modify emotions, thoughts and behaviors when faced with new stressors.

While it is illusory to expect therapy to change personality, traits can be modified to modify their behavioral expression. Moreover, patients can learn to make more judicious and selective use of existing traits, and put them to better use. The same characteristics that are maladaptive in some contexts can be adaptive in other contexts (4). Therefore, patients can capitalize on their strong points by selecting environments in which traits are most likely to be useful. They can also minimize weak points by avoiding environments in which their traits are not useful. This process might be described as finding a suitable social niche.

To achieve these goals, it is useful to think of psychotherapy as a form of education, with a curriculum focusing on better and more adaptive use

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of traits. The classroom teaching takes place in the therapist’s office, the laboratory is the patient’s life, and the homework consists of applying new behaviors to old situations.

In managing personality disorders, therapists can also keep in mind that most patients improve without treatment. Naturalistic recovery prob- ably occurs as a result of modulating problematical behaviors and finding more adaptive solutions to problems. The goal of therapy is to speed up this process.

A general model of treatment for personality disorders might be divided into four steps:

1) Identifying when traits or behavioral patterns are maladaptive. 2) Observing the emotional states that lead to problematic behaviors. 3) Experimenting with more effective alternatives to see how they

work. 4) Practicing new strategies. To illustrate how the model can be applied in practice, I will present a

clinical example of the treatment of a patient with BPD.

CASE EXAMPLE:

Claudia was a 19-year-old student who complained of depression and therefore was referred by her supervisor to a psychiatrist. When he immediately prescribed an antidepressant, Claudia felt misunderstood, and angrily swallowed the whole bottle, precipitating a hospital admission.

Claudia had also felt misunderstood by her parents. Claudia’s father, a military man, had moved around the country, leaving Claudia’s mother feeling neglected and unhappy. But these family problems have to be understood in interaction with Claudia’s volatile temperament, apparent even during her childhood. Claudia was one of four children, and the only one to have significant psychological symptoms.

Claudia spent two months in the hospital, and there were complications concerning her discharge. Facing separation from the protected milieu, she had a micropsychotic episode, marked by disorientation and auditory hallucinations. Claudia was prescribed a low-dose neuroleptic for the next few months, and was then followed in outpatient psychotherapy over a period of three years.

Identifying: A primary goal was to help Claudia identify her inner reactions to life

events, as opposed to blaming others for bringing feelings on. Most of this work focused on increasing Claudia’s tolerance for the defects of her parents. Claudia also had to undergo a slow and painful separation from

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a fellow student with BPD. This student was admitted to the ward at the same time, and encouraged her to think about suicide rather than about coping.

Observing;

Claudia had to learn to observe episodes of emotional dysregulation in order to manage them better. Many therapy sessions focused on her disappointments and separations. Claudia also needed to identify her tendency to devalue people when they disappointed her. She learned to tolerate the fact that the therapist would not always understand her, and that she needed to wait when he went on vacation.

Experim en ting: Claudia began a series of relationships with men, but her initial choices

were unsuitable. She learned from these experiences about the strength of her needs and how to modulate them. Aware of these sensitivities, Claudia was less likely to have her emotions spin out of control. Once Claudia completed her education, she developed professional competence that became an important protective element from emotional storms. She also established better friendships, finding confidantes who supported health rather than pathology.

Practicing:

During the course of her therapy, Claudia developed her career and entered a serious relationship, marrying a man who appeared to be a stabilizing factor in her life. She now no longer fell into uncontrolled emotional states and gave up her impulsive behavioral patterns. Termina- tion was mutually agreed on, and did not lead to the complications that had occurred when she was discharged from the hospital.

EOLLOW-UP:

Claudia was interviewed 15 years after her initial presentation. At age 34, she had no symptoms, and was rising in the hierarchy of her company. But Claudia’s marriage was not a success, and she had begun a long-term affair with a married man. They would meet briefly in town, or for longer periods during conferences. Claudia may have found it easier to have a relationship with a man who she did not have to live with. The excitement of a secret romance trumped the disillusionment of intimacy.

When Claudia was interviewed at age 49, again, she had no symptoms. Claudia had risen in her company, and now held an executive position. But she had left her husband, and had borne a child by her lover. This man had never been willing to leave his wife, and while he and Claudia were no

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Personality Disorders Over Time

longer physically involved, they still saw each other. The son, now eight years old, was the center of Claudia’s life. She expressed concern that at some point she would have to tell her son the identity of his father.

Claudia had found a niche in life that was unconventional, but may have been more suitable for her than ordinary family life. She also found that raising a child avoided the difficulties associated with depending on other people. At this point, Claudia did not seem to be recreating previous interpersonal conflicts with her son, although one wondered how she would deal with his adolescence.

CONCLUSIONS

The case presented here is fairly representative of the therapy of patients with personality disorders. Its long-term outcome, with steady employment but somewhat restricted intimate relationships, is typical for the larger sample described in our research (31). A good outcome need not consist of an untroubled life, but a way around troubles.

In patients with personality disorders, difficulties can sometimes con- tinue for some years following termination, consistent with the chronic and slowly remitting patterns observed in long-term follow-up studies.

Thus, further courses of psychotherapy are not uncommon in this population. Researchers on the long-term outcome in BPD (21,29) have recommended that the therapist’s door should always be kept open. Once a patient’s problems are well known, “retreads” can often be brief. Thus, intermittent rather than continuous therapy may be the most appropriate and cost-effective prescription for patients with personality disorders.

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Discussion Week 11

Discussion Week 11

Clients with personality disorders often find it difficult to overcome their problems and function in daily life. Even when these clients are aware that they have a dysfunction with their personality and are open to counseling, treatment can be challenging for both the client and the therapist. For this Discussion, as you examine personality disorders, consider therapeutic approaches you might use with clients.

Post a description of the personality disorder you selected. Explain a therapeutic approach (including psychotropic medications if appropriate) you might use to treat a client presenting with this disorder, including how you would share your diagnosis of this disorder to the client in order to avoid damaging the therapeutic relationship. Support your approach with evidence-based literature.

The Selected personality disorder is Borderline Personality Disorder.

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Activities to perform to obtain needed Experience

Activities to perform to obtain needed Experience

Career Plan for “Enter Your Name”

Long Term Goals

Short Term Goals

Experience to Date

Experience Needed

Activities to perform to obtain needed Experience

Course to take

Tracking Sheet

Academic Quarter

Activities

Contacts

1st Quarter 3rd Year

2nd Quarter 3rd Year

3rd Quarter 3rd Year

4th Quarter 3rd Year

1st Quarter 4th Year

2nd Quarter 4th Year

3rd Quarter 4th Year

4th Quarter 4th Year

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The Career Decision Submission

The Career Decision Submission

Assignment Details

As you have learned in this unit, most people just let their careers happen. They do not plan and pursue the activities needed to make a particular career happen. In addition to researching careers and industries and networking with professionals in those industries, it is important to create a career plan.

Click here to download a template used to create a career plan for your final 2 years at the University (even if you have more than 2 years or fewer than 2 years left):

You will be filling out the following sections:

Long-Term Goals: What is your ultimate career goal (e.g., I would like to run my own manufacturing company)?

Short-Term Goals: What is your immediate career goal (e.g., I would like to obtain a position as a production assistant in a medium-to-large manufacturing company)?

Experience to Date: What current experience do you have that could help you obtain this position/career goal (e.g., college education, past employment, volunteer, special skills)?

Experience Needed: What additional skills do you need to pursue this position/career goal (e.g., additional education, experience in the industry, training)?

Activities to Perform to Obtain Needed Experience: What can you do to obtain the experience needed for this position/career goal (e.g., go back to school, volunteer, network)?

Courses to Take: What courses can you take in your final quarters that could help you obtain this position/career goal (e.g., Supply Chain Management, Entrepreneurship, Accounting)?

Tracking Sheet: Record the activities that you have performed and the contacts that you have made in each of the remaining quarters at the University. Note: Because this task is meant to be a recording if things that you have already done, you will need to make up these events (e.g., joined student chapter of APICS, met John Doe, VP of Operations at ABC Company).

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A Wellness Program for the Elderly

A Wellness Program for the Elderly

original question my answer:

Discussion Question

Develop a wellness program with a holistic approach for the older adult you identified, using resources available in your community. Discuss how this approach will prove an optimum level of well-being.

A Wellness Program for the Elderly

Target Population: The target population for this wellness program will be the elderly people like —– who suffer from arthritis and do not have the right health management resources at their disposal.

The unmet needs of the population: After having a conversation with —-, so many things surfaced. For example, he told me that the medical staffs do not give patients like him the needed medical care, meaning that there is a big gap in healthcare. He also extended a lot of gratitude to his caretaker saying that were it not for her, his condition would have been far much worse. While this was true, I also felt that — is not given the care that is required since he constantly complains of severe joint pains and has difficulties doing the daily tasks such as standing up on his own and bathing himself. He is just a representation of thousands of other elder patients like him who have absolutely no one to take care of them and are uninsured.

Holistic interventions to address the identified needs: The following are the strategies that will be included in the program. First and foremost, professionals will be hired to engage such elderly persons with exercises such as aerobics, range of motion exercises strengthening and enduring exercises (Mok, 2018). In the program, the patients will be taught on the best ways to manage their pain given that arthritis is a life-long condition that can only be managed using the right treatments and protocols (Roedl, Wilson & Fine, 2016). Furthermore, I would engage doctors in the program so that they can be able to get a first-hand glance of the problem on the ground.

Implementation of the program: The proposed program will be developed in phases. The first phase will be the trial phase and if all goes well, full implementation will follow. This initiative is targeted at helping both organizations and elderly patients into their journey towards living a life with arthritis.

professor question to my answer:

What barriers might you expect that slow down complete implementation of the process?

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What barriers might you expect that slow down complete implementation of the process?

What barriers might you expect that slow down complete implementation of the process?

original question my answer:

Discussion Question

Develop a wellness program with a holistic approach for the older adult you identified, using resources available in your community. Discuss how this approach will prove an optimum level of well-being.

A Wellness Program for the Elderly

Target Population: The target population for this wellness program will be the elderly people like —– who suffer from arthritis and do not have the right health management resources at their disposal.

The unmet needs of the population: After having a conversation with —-, so many things surfaced. For example, he told me that the medical staffs do not give patients like him the needed medical care, meaning that there is a big gap in healthcare. He also extended a lot of gratitude to his caretaker saying that were it not for her, his condition would have been far much worse. While this was true, I also felt that — is not given the care that is required since he constantly complains of severe joint pains and has difficulties doing the daily tasks such as standing up on his own and bathing himself. He is just a representation of thousands of other elder patients like him who have absolutely no one to take care of them and are uninsured.

Holistic interventions to address the identified needs: The following are the strategies that will be included in the program. First and foremost, professionals will be hired to engage such elderly persons with exercises such as aerobics, range of motion exercises strengthening and enduring exercises (Mok, 2018). In the program, the patients will be taught on the best ways to manage their pain given that arthritis is a life-long condition that can only be managed using the right treatments and protocols (Roedl, Wilson & Fine, 2016). Furthermore, I would engage doctors in the program so that they can be able to get a first-hand glance of the problem on the ground.

Implementation of the program: The proposed program will be developed in phases. The first phase will be the trial phase and if all goes well, full implementation will follow. This initiative is targeted at helping both organizations and elderly patients into their journey towards living a life with arthritis.

professor question to my answer:

What barriers might you expect that slow down complete implementation of the process?

The post What barriers might you expect that slow down complete implementation of the process? appeared first on graduatepaperhelp.

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"