By Taiga Uranaka and Noriyuki Hirata
Sources told Reuters that Japan's securities watchdog was looking into past Olympus takeover deals, focusing on whether it has properly disclosed relevant information.
Olympus fired its British President and Chief Executive Michael Woodford on October 14, just two weeks after his appointment as CEO, saying he failed to understand the company's management style and Japanese culture. Kikukawa then took over Woodford's role.
Woodford, who joined the camera and endoscope maker in 1980, said he was sacked for questioning a $687 million advisory fee paid in relation to a $2.2 billion takeover in 2008 as well as other deals, and for urging Kikukawa to step down.
"For now the stock should rebound on his resignation, but in reality nothing has been cleared up. There are still many investigations left to come," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Woodford told Reuters that Kikukawa's resignation was "a start" but added that his replacement -- Shuichi Takayama, a 41-year company veteran -- had also failed to demand explanations about hefty fees linked to acquisitions.
Takayama sniped back at the ex-CEO turned whistleblower, telling a news conference there was no problem with fees paid by Olympus and that the company was extremely angry that Woodford revealed internal information while he was still a director.
"I was one of those who agreed to Mr Woodford's dismissal. The reason was his autocratic actions, and these included intimidation of my own staff."
Kikukawa said in a separate statement he had stepped down to restore confidence in the company under the new management and that he would continue to work as a director.
The Olympus scandal could re-ignite debate over what critics say is a deep-seated weakness of Japanese management -- a lack of strong independent oversight of boards, which gives shareholders' rights short shrift.
A small Japanese business monthly magazine called Facta first raised red flags about Olympus M&A deals in August and the Securities and Exchange Surveillance Commission (SESC) started paying particular attention to the company around that time, said two sources, who were not authorized to discuss the matter publicly. SESC officials declined to comment on the probe, as did an Olympus spokeswoman.
Olympus shares fell 7.6 percent on Wednesday and have lost more than half their value since Woodford was sacked.
The former British CEO said he was fired for questioning the payment to advisers in the $2.2 billion takeover of medical equipment maker Gyrus. At about 30 percent of the acquisition price, that set a record in M&A fees.
Unanswered questions about the Gyrus deal and other Olympus acquisitions spurred various theories, including speculation Japan's yakuza crime syndicates, euphemistically referred to as "anti-social forces," could be involved.
Asked whether the company's financial advisers had any connection with organized crime, Takayama said: "You are asking me about anti-social forces, but I am absolutely not aware of any such thing."
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.
While Okubo suggested parliament should look into the matter, Japanese politicians' and the media's initial reaction to the scandal has been remarkably muted.
But in a sign of growing alarm over potential damage to Japan's credibility, another ruling party lawmaker has asked the upper house financial affairs committee to question Tokyo Stock Exchange officials and regulators on Olympus.
Takayama, 61, joined Olympus straight from an engineering high school in 1970 and has served on the company's board since 2006 after holding several senior managerial positions.
Ex-CEO Woodford has 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.
(Additional reporting by Isabel Reynolds, Hideyuki Sano, Nathan Layne; Writing by Linda Sieg and Tomasz Janowski; Editing by Edmund Klamann and Dean Yates)