Toshiba Corp. was kicked off a stock index showcasing the best domestic companies after a ¥152 billion ($1.2 billion) accounting scandal, while Olympus Corp. made the cut.
The government-backed JPX-Nikkei Index 400 added 42 other firms, including Shimizu Corp. and Daio Paper Corp., the gauge's compilers said in a statement Friday. Lixil Group Corp., McDonald's Holdings Co. (Japan) and Konami Corp. are among those being removed when the changes take effect on Aug. 31.
This marks the second reshuffle of the index, which picks companies with the best operating income, return on equity and market value to shame executives of those it excludes into boosting profit and shareholder returns. Inclusion matters because investors, including the world's largest pension fund, use the stock gauge as a benchmark.
Toshiba was tossed out after an internal probe revealed managers overstated profits. A report showed that top executives set unrealistic targets that systematically led to the flawed accounting. The company must correct earnings stretching back six years.
"Toshiba's financial data are wrong, so they're not even at the starting line" for selection, Japan Exchange Group Inc. Chief Executive Officer Akira Kiyota told reporters on July 28 in Tokyo.