Olympus Corp announced Wednesday that its chairman and president, Tsuyoshi Kikukawa, had stepped down over media reports of a widening scandal, as sources said Japan's main securities watchdog was looking into the 92-year-old firm's dubious acquisition deals.

Olympus fired its British president and chief executive Michael Woodford Oct. 14, charging that he failed to understand the company's management style and Japanese culture, and its chairman Kikukawa took over his role.

Woodford -- who joined the company in 1980 -- said he was sacked for questioning a massive advisory fee paid in a 2008 takeover as well as other deals, and for urging Kikukawa to step down.

The Olympus scandal could re-ignite debate on what critics say is a deep-seated weakness of Japanese management -- a lack of strong independent oversight of boards that risks inefficient use of capital and gives shareholders' rights short shrift.

Shares of the camera and endoscope maker fell 7.6 percent on Wednesday and have lost more than half their value since Woodford was sacked.

Shuichi Takayama, a managing director of the company, was appointed to replace Kikukawa as president.

The company is scheduled to hold a news conference at 1730 JST (4:30 a.m. EDT).

The former British CEO says he was fired for questioning a $687 million payment to advisers in the $2.2 billion takeover of medical equipment maker Gyrus in 2008. At about 30 percent of the acquisition price, that set a record in M&A fees.

LOSING CONFIDENCE

The monthly magazine Facta first raised red flags about Olympus M&A deals in its August edition, and the Securities and Exchange Surveillance Commission started paying particular attention to the company around that time, said the sources, who were not authorized to discuss the matter publicly.

SESC officials declined to comment on the probe, as did an

Olympus spokeswoman who said she could not comment on the matter.

A senior Japanese lawmaker on Tuesday called for probes by financial and securities watchdogs and urged Olympus to explain the fees, which could risk shareholders losing confidence in Japan.

At least the fees were outlandish. The company must explain the whole circumstances behind the incident, said Tsutomu Okubo, deputy policy chief of the Democratic Party of Japan.

Ex-CEO Woodford said he was now talking to the U.S. Federal Bureau of Investigation and Britain's Serious Fraud Office.

Woodford has identified the advisory firms involved in the Gyrus takeover as New York-based AXES America LLC and AXAM Investment Ltd in the Cayman Islands.

Japan Securities Finance, a stock lending brokerage, on Tuesday put Olympus on a list of shares for which caution is advised on margin trading due to a surge in such trading.

And in a heads up to investors, the Tokyo Stock Exchange also started to announce margin trading positions on a daily basis.

(Additional reporting by Hideyuki Sano; Writing by Taiga Uranaka and Linda Sieg; Editing by Edmund Klamann)