(Bloomberg) Toshiba Corp. lost $2.8 billion in market value after the industrial and electronics group withdrew its earnings forecast pending an internal probe into improper accounting on infrastructure projects.

The shares fell 17 percent, the biggest drop since March 2011, to 403.3 yen in Tokyo. The company announced it was extending an accounting probe and withdrawing its earnings forecast for last fiscal year on May 8, after trading had closed. A gauge of Toshiba’s perceived creditworthiness deteriorated by the most in four years.

Toshiba, which makes nuclear reactors, computer memory chips and consumer electronics and controls Westinghouse Electric Co., also said it may have to revise earnings from fiscal year 2013 and earlier.

The Tokyo-based company apologized after canceling its dividend and appointing a third-party committee to investigate.

“It’s a negative for investors and quite an embarrassment for a major company like Toshiba to withdraw figures,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. “Accounting standards for infrastructure projects also tend to be vague, allowing for something like this to happen.”

The company had projected net income of 120 billion yen ($1 billion) on sales of 6.7 trillion yen in the year ended March.

The announcement follows an April 3 statement in which the company said it was investigating possible accounting problems.

‘Understated Costs’
“We sincerely apologize to stakeholders,” Yukihito Uchida, a spokesman for Toshiba, said by e-mail. “We will do our best for the recovery of trust.”

Several construction projects have understated costs, and the investigation so far has included power systems, social infrastructure and community solutions units, Aya Oshima, a spokeswoman for Toshiba, said May 8.

The units encompass nuclear, hydroelectric and wind power equipment, air-traffic control and railway systems, and urban infrastructure services that rely on big data.

The magnitude of the earnings restatement and responsibility for the misstatements aren’t yet clear, Oshima said.

Credit-default swaps linked to Toshiba’s debt surged 49.5 basis points to 126 basis points at 9:15 a.m. Monday in New York, according to data provider CMA, which is owned by McGraw Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market.

That was the biggest jump in the price of the contracts since March 2011, data show. Buyers use the swaps to insure corporate bonds against possible default, and prices increase as investor confidence deteriorates.

Potential Misconduct
There is potential for Toshiba to uncover financial misconduct against external parties, Takeo Miyamoto, a Tokyo- based analyst at Mitsubishi UFJ Morgan Stanley Securities Co., wrote in a report on May 8.

Toshiba got about 11 percent of operating income from its power and social infrastructure business in the year started April 1, 2013.

The company won’t report earnings until at least next month, it said.

“Without dividend income and not being sure whether the earnings on which the share price was based are actually true, institutional investors have no choice but to sell the stock,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.

—With assistance from Sridhar Natarajan in New York.

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