Shares in Olympus Corp plunged by a quarter on Monday after media reports quoted its ousted chief executive of accusing the board of firing him for probing allegations of improper payments related to acquisitions.
Michael Woodford, 51, was sacked just two weeks after the company promoted the Briton from his role as president with glowing reports on his performance.
Combined with Friday's 18 percent fall, the plunge has wiped out $3.2 billion in market value from the Japanese precision instrument and camera maker.
The dismissal of the president has shattered equity market expectations of structural reform at the firm, Deutsche analyst Yoshikazu Higurashi wrote in a report.
Japanese boards rarely dismiss top executives, so the announcement took financial markets by surprise.
In an interview with the Wall Street Journal, 30-year Olympus veteran, Woodford, said he had asked the chairman, Tsuyoshi Kikukawa, to resign over serious governance concerns.
Olympus denied any wrongdoing but the sacking triggered a slew of downgrades from brokerages worried about Olympus stepping back from a commitment to cut costs.
All M&A deals were conducted using appropriate accounting, following appropriate processes, an Olympus spokesman told Reuters.
Olympus shares ended 24 percent lower at 1,555 yen, the lowest in two and a half years in a market up 1.5 percent. More than 54 million shares were traded versus average volume of 3 million shares traded over the past 30 days.
This is a very interesting development because obviously there is something very fishy here, said Nicholas Benes, a corporate governance expert and head of Board Director Training Institute of Japan.
You'd have to be an idiot to think there is not something very fishy here if he's (Woodford) not getting an explanation for it and they are not giving it publicly after all this garbage has been sent out into the newspapers.
A spokesman at the Tokyo Stock Exchange declined to say whether the bourse would begin any probe into Woodford's reported allegation. On Monday, major local media outlets largely ignored the ongoing board tussle at Olympus.
Analysts said the dismissal could deal a blow to the ambitious cost-cutting plans at Olympus that Woodford had championed. He was credited with successfully cutting costs in the company's European division.
Olympus's operating profit dipped 41 percent to 35.4 billion yen in ending March 31, 2011, as its struggling camera division lost 15 billion yen.
Goldman Sachs, Nomura, Citigroup, JPMorgan and Daiwa Securities also cut their ratings on Olympus.
Kikukawa will take over as president and chief executive, roles he had stepped away from to allow Woodford's appointments.
Olympus said Woodford circumvented the company's management structure by giving orders directly to staff, and said there had been differences over restructuring the R&D division.
There were deep rifts between Mr. Woodford and the rest of management concerning the direction of the company and steps needed to be taken, and the situation was such that it was hampering decision-making, the Olympus spokesman reiterated on Monday.
Woodford joined KeyMed, a medical subsidiary of Olympus in 1980 after working for Schweppes.
Olympus was known in general as a fairly respected company and in general, disclosure in Japan, although not great on a global basis, is quite a bit better than Asian disclosure policies, said Glen Wood, partner and head of sales in Tokyo at JI-Asia, the equities research arm of Societe Generale.
I think this is a big shock to the market and will have implications for other companies. I don't think you can look at Japan the same way. ($1 = 77.365 Japanese Yen)
(Additional reporting by Lisa Twaronite, Reiji Murai and Kei Okamura; Editing by Edwina Gibbs and Anshuman Daga)