Toshiba Corp.’s proposal to split into two companies has been dealt a blow after a prominent shareholder advisory firm came out against the plan.

In a report, Institutional Shareholder Services Inc. urged investors in the conglomerate to reject the proposal.

"The spin-off option offers upside to the status quo, but the associated execution risks do not allow for an inescapable conclusion that the split is superior to a privatization,” ISS said in the report dated Wednesday.