News Corporation shares have tumbled to a two-year low in Australia as the escalating phone hacking scandal continues to damage Rupert Murdoch's empire.

Shares in News Corp fell as much as 7.6% on Monday on the Australian stock market as traders reacted to the resignation, and subsequent arrest, of Rebekah Brooks, and the resignations of Les Hinton, chief executive of Dow Jones and a key Murdoch ally, and Sir Paul Stephenson, the commissioner of the Metropolitan police.

In late trading, they were 4.2% lower at AUS$14.14, their lowest level since July 2009. News Corp's Australian shares have now dropped by nearly 20% since the crisis began on 4 July. News Corp's US-listed shares are expected to mirror the Australian losses when trading begins on Wall Street.

Shareholders said the stream of revelations and allegations surrounding phone hacking has caused significant damage to News Corp. There is speculation that the group may be forced to sell some of its media assets.

"From an earnings point of view, News of the World was less than one percent of earnings but this has catapulted to something greater and it is hard to quantify." Simon Burge, chief investment officer at ATI Asset Management in Sydney, told Reuters.

City analysts suggested last week that News Corp may be compelled to cut its 39% stake in BSkyB, having withdrawn its takeover bid.

Some investors are now questioning whether News Corp's senior management can survive the crisis. Bloomberg reported on Monday that some of the company's independent directors are considering whether a change of leadership is needed, putting additional pressures on founder Rupert Murdoch.