Japan’s Nidec shares sink 22% on fears of systematic accounting issues

Nidec’s shares plunged as much as 22 per cent, the most on record, after the Japanese electronic components maker found evidence that senior executives may have been involved in a number of accounting issues at subsidiaries.

The Kyoto-based manufacturer of precision motors set up an external committee to investigate cases of improper accounting at the company. An internal probe into a payment of approximately 200 million yen (S$1.7 million) by Nidec Techno Motor in Zhejiang spurred concern that group companies may have arbitrarily decided when to write down risky assets with management’s knowledge, necessitating an objective third-party probe, Nidec said.

Its shares touched their lowest since April on Thursday (Sep 4) and are down about 10 per cent from the start of the year, compared with a roughly 10 per cent gain in the benchmark Topix.

“The veracity of the matter is unclear but if there were indeed improper accounting practices, the size of the impact is opaque, which would be a negative surprise,” Citigroup analyst Takayuki Naito wrote in a note. “The shares are likely to find upside hard work until the results of the third-party committee’s investigation are released.”

Nidec, the world’s top maker of mini motors, is fighting both lacklustre demand for hard drives and cutthroat prices in China’s electric-vehicle market. It’s been seeking entry into higher-margin areas of growth via acquisitions under new leadership after 81-year-old founder Shigenobu Nagamori stepped aside from the chief executive officer post last year.

In June, Nidec delayed its submission of its securities report over errors in country-of-origin declarations and unpaid import tariffs at a subsidiary in Italy.

At that time, Nagamori, who continues to spearhead the company’s acquisitions, said that Nidec was prioritising compliance – an about-face from his former stance prioritising growth and encouraging gruelling work ethic.

“The investigations found multiple documents suggesting that, in addition to Techno, the Company and its group companies could have engaged in improper accounting with the involvement or knowledge of its or their management,” Nidec said on Wednesday. BLOOMBERG