# kaal:claim:1428387-024

**Claim.** The issuer-buyer relationship and the incentives inside it are unlikely to be able to adequately control the principal-agent relationship between issuer and rating agency so as to ensure accurate ratings.

**Type.** failure  **Support.** argued

**Holds when.**

- under the issuer-pays rating model for CDOs

**Source quote.**

> It seems unlikely that the issuer-buyer relationship and the incentives inherent within could adequately control the principal-agent relationship between issuer and rating agency to ensure accurate ratings.

**From.** Kaal, *Hedge Fund Valuation Retailization, Regulation, and Investor Suitability* (2009), V.A.2 Moral Hazard of Rating Agencies, page 42

**Cite as.** Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

**Verify.** sha256 of source PDF `6aa3a280dc6750723be2389f3af2aabf3a16c4ce20e49fcdaddd7f2ea95a67aa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202009%20-%20Hedge%20Fund%20Valuation%20Retailization%2C%20Regulation%2C%20and%20Investor%20Suitability.pdf

**Failure mode.** unmonitorable-rating-agent  (family: agency-cost-and-managerial-opportunism)

**Topics.** compliance, ai-and-agents, corporate-governance

**Keywords.** rating-agencies, monitoring-failure, principal-agent, cdo

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