Nidec's Accounting Crisis and the Implications for Investor Trust and Long-Term Viability: Assessing Governance Risks and Delisting Likelihood in the Wake of TSE's Special Alert Designation

In October 2025, Nidec Corporation, a global leader in precision motor manufacturing, found itself at the center of a corporate governance and accounting scandal that sent shockwaves through the Tokyo Stock Exchange (TSE). The company's shares plummeted 22% following revelations of improper accounting practices, including a ¥200 million lump-sum payment by a Chinese subsidiary and broader irregularities across its operations, as reported in a ScanX article. The TSE responded by placing Nidec on a "special alert" status, a designation that signals heightened scrutiny and a potential path to delisting if internal controls are not swiftly and effectively improved, according to a Japan Times report. This crisis raises critical questions about investor trust, corporate accountability, and the long-term viability of a company once celebrated for its innovation and global dominance.

Governance Failures and Systemic Weaknesses

Nidec's accounting irregularities are not isolated incidents but symptoms of systemic governance failures. Internal documents suggest that management may have been aware of the improper practices, including arbitrary adjustments to asset write-downs and delayed financial reporting, according to a MarketScreener report. These lapses have eroded confidence in the company's leadership and board oversight, with the auditing firm unable to express an opinion on Nidec's financial statements for the fiscal year ending March 2025, as reported by MarketScreener. The TSE's special alert designation underscores the severity of these issues, requiring Nidec to demonstrate tangible progress in strengthening internal controls within a defined timeline. Failure to meet these requirements could trigger delisting, a fate that has befallen other Japanese corporations in recent years.

TSE Delisting Criteria and Historical Precedents

The TSE's delisting process for companies under "special alert" is both rigorous and transparent. Under the Japan Exchange Group's rules, firms must show measurable improvements in governance and financial reporting during follow-up periods; the JPX delisting outline describes these requirements and timelines. Historical precedents highlight the gravity of this process. For instance, Toshiba's delisting in 2023 followed a 74-year history of governance failures, including a $1.59 billion profit overstatement and collusion between management and regulators, as detailed in a delisting case study. Similarly, recent delistings in 2024-2025, such as The Furukawa Battery Co. and TOPCON CORPORATION, reflect the TSE's tightening standards and investor demands for accountability, listings that are catalogued on the JPX supervision page. These cases illustrate that the TSE is no longer tolerant of opaque practices, even among long-standing market leaders.

Investor Trust and Market Reactions

The immediate market reaction to Nidec's crisis was severe. Its stock price fell to ¥2.05 per share, and the company was removed from the Nikkei 225 Stock Average, a symbolic and practical blow to its market standing (as reported in the Japan Times report). Investor trust, once a cornerstone of Nidec's success, now faces a prolonged test. The Pomerantz Law Firm's investigation into potential securities fraud at Trinseo PLC (NYSE: TSE)-a separate but similarly situated case-further highlights the reputational and legal risks associated with governance failures. For Nidec, the challenge lies not only in addressing accounting irregularities but in rebuilding credibility through transparent reforms.

Path Forward and Delisting Likelihood

Nidec has taken initial steps to mitigate the crisis, including establishing a third-party investigation committee and suspending dividend and share buyback programs, according to MarketScreener. However, these measures may not be sufficient to satisfy the TSE's stringent requirements. The company must overhaul its internal controls, enhance board accountability, and provide verifiable evidence of progress. Given the TSE's historical approach-exemplified by Toshiba's delisting-it is prudent to assess Nidec's delisting likelihood as moderate to high unless it demonstrates rapid and sustained improvements.

Conclusion

Nidec's accounting crisis serves as a cautionary tale for investors and corporate leaders alike. The TSE's special alert designation is both a warning and an opportunity: a chance for Nidec to reform its governance practices or face the consequences of delisting. While the company's global operations and market presence remain formidable, the path to regaining investor trust will require more than public pledges-it will demand structural change and unwavering transparency. For investors, the key takeaway is clear: governance risks are no longer abstract concerns but existential threats that can redefine a company's future.