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Carlos Ghosn, chairman of Nissan Motor Co., speaks during an interview in Yokohama, Japan, on Thursday, Feb. 23, 2017.
The arrest of Carlos Ghosn, chairman of Nissan and a board member at Mitsubishi, has also thrown into question the future of the two companies' global alliance with French automaker Renault. But analysts say that's not likely.
Ghosn was arrested Monday amid allegations of financial misconduct, sending shares of the Japanese automakers on a downward spiral on Tuesday.
Nissan said in a statement Monday that "over many years," Ghosn and board director, Greg Kelly, had been under-reporting compensation amounts to the Tokyo Stock Exchange securities report. According to Reuters, Japanese media said Ghosn had reported about 10 billion yen ($88.9 million) of annualcompensation as about 5 billion yen for several years.
Nissan Chief Executive Hiroto Saikawa, said at a Monday press conference that both men had been arrested and he was planning to propose to the board on Thursday to remove them from their roles. Mitsubishi also said that it would seek to remove Ghosn, who sits on its board of directors, from his current position at the company.
"We find media headlines saying that the alliance may fall to be overly alarmist."
-Richard Hilgert, Morningstar
Shares of Nissan tumbled by 5.45 percent on Tuesday, while Mitsubishi tanked 6.85 percent. Renault shares were down more than 8 percent in European trade on Monday.
Alliance will likely continue
Ghosn is also the chairman and CEO Renault, and his arrest has thrown into question the future of the company's alliance with Nissan and Mitsubishi. He is also chairman and CEO of the alliance.
Renault owns 43.4 percent of Nissan, while Nissan owns 15 percent of Renault, with no voting rights in a partnership that began in 1999. Since 2016, Nissan has held a 34 percent controlling stake in its smaller Japanese rival, Mitsubishi.
Nissan Chairman Carlos Ghosn arrested for violating Japanese financial law
"While we view the allegations against Ghosn as a serious breach of shareholder trust in the senior leadership of not only Nissan but also the entire alliance, we find media headlines saying that the alliance may fall to be overly alarmist," Richard Hilgert, a senior equity analyst at Morningstar, said in a note.
"The scandal represents substantial key-man risk to the alliance but, in our opinion, the risk does not rise to the level of existential," he said.
Another analyst also told CNBC's that the alliance will likely continue despite Ghosn's arrest.
"Our belief is that the alliance will continue to pursue the joint activities," said Janet Lewis, head of industrials research, Asia, at Macquarie Capital Securities on "Squawk Box" Tuesday. "It did not depend on one person, there are hundreds of Renault and Mistubishi and Nissan employees working together on these projects."
"The degree of integration at lower levels is substantial, nobody wins if they decide to, to move away," she said.
'Truly shocking'
The latest fiasco surprised some analysts.
"It's truly shocking," Rebecca Lindland, executive analyst at Kelley Blue Book, told CNBC's "Street Signs" Tuesday in response to the allegations against Ghosn.
"To see this, to hear this unfold. It's just, it's terrible," she added. "It's such … a disgrace in many ways and such a waste of an incredible career."
Morningstar's Hilgert echoed Lindland's sentiment.
"The news was a complete shock to us," Hilgert said in his note. "We had respected Ghosn as an adept industry operator and credit him with an impressive turnaround at Nissan in the early 2000s, as well as building the Renault- Nissan-Mitsubishi alliance."
— CNBC's David Reid and Robert Ferris, and Reuters contributed to this report.