In a scenario that has numerous similarities to the 2011 Olympus Scandal, Toshiba has been found to have been overstating its profitability over a period of six years, Sky News reports.
The Olympus scandal was described by the Wall Street Journal as “one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history” and prompted a 37 per cent fall in Olympus’ market value.
Although this scandal doesn’t match the size of the Olympus one ($1.7bn) it will serve as further embarrassment to Japan’s Prime Minister Shinzo Abe who is trying to improve the country’s corporate governance in a bid to attract more foreign direct investment.
In a report filed today by Toshiba to the Tokyo Stock Exchange, the culture at the firm was described as one in which subordinates “avoid going against superiors’ wishes”.
Toshiba chief executive Hisao Tanaka is expected to step aside in coming months and most of the board will be replaced in the wake of this scandal.
Toshiba’s share price has fallen by 26 per cent since the scandal first surfaced in early April. The scale of the scandal is around three times Toshiba’s initial estimate, so further selling is likely to be experienced when the Nikkei next opens.
Toshiba has been unable to close its books for the latest financial year as a result of the investigation and was also forced to cancel its dividend.
The announcement comes less than two years after it was revealed that Toshiba Medical Information Systems, a subsidiary of Toshiba, had overstated results for several years.
