Olympus president Tsuyoshi Kikukawa has resigned after a scandal over advisory fees wiped out half of the firm's market value.
Japan's securities watchdog is looking into past Olympus takeover deals, focusing on whether it has properly disclosed relevant information, sources have told Reuters.
Olympus fired its British chief executive Michael Woodford earlier this month, 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 began as a UK salesman when he joined Olympus in 1980, said he was sacked for questioning a $687 million advisory fee linked to a $2.2 billion takeover in 2008 as well as other deals he says have destroyed about $1.3 billion of shareholder value.
He has called for the resignation of Olympus's whole board while sending dossiers on odd-looking deals to Britain's Serious Fraud Office (SFO) and Japan's Securities and Exchange Surveillance Commission (SESC). He is also in touch with the U.S. Federal Bureau of Investigation (FBI).
Josh Shores, a principal at Olympus's largest non-Japanese investor Southeastern Asset Management, said the boardroom re-shuffle was "a step in the right direction".
But he demanded the swift appointment of a "fully independent, objective third party committee" to oversee a broad corporate governance and accounting investigation by an external auditor.
"That is the next critical step. It will not be credible if the committee is appointed by the company without any input from other stakeholders - stakeholders and the media will not trust it," he said.
Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, said the company's battered share price should rebound on the resignation.
But he added: "In reality nothing has been cleared up. There are still many investigations left to come."
Woodford said 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.
"The only way you can stop the company heading for the rocks is by answering the questions," he said.
Takayama told 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 has re-ignited 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 monthly business magazine called Facta first raised red flags about Olympus M&A deals in August and the 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 per cent on Wednesday and have lost more than half their value since Woodford was sacked.
The Briton said he was fired for questioning the payment to unidentified advisers in the $2.2 billion takeover of medical equipment maker Gyrus.
At about 30 per cent of the acquisition price, that set a record in M&A fees.
Unanswered questions about the Gyrus deal and other Olympus acquisitions have 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."
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.
A senior Japanese lawmaker on Tuesday called for probes by financial and securities watchdogs and urged Olympus to explain the fees, which risked 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 local 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.
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 announcing margin trading positions on a daily basis.
The exchange also said it would cooperate with regulators to enforce corporate governance of listed companies.