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SHANGHAI/HONG KONG (Reuters) - China Huarong Asset Management Co 2799.HK confirmed its chairman Lai Xiaomin, who is under investigation for alleged corruption, had stepped down, sparking an 11 percent tumble in shares of the nation's biggest bad debt manager on Friday.

Reuters reported earlier this week, citing sources, that a senior banking regulator official would take the helm at state-owned Huarong after China’s anti-corruption watchdog launched a probe into Lai for “serious discipline violations”, a euphemism for graft.

Huarong said in a statement to the Hong Kong stock exchange late on Thursday that Lai’s departure “will not cause any adverse impact to the business.”

Wang Zhanfeng, head of the Guangdong branch of China’s banking regulator, had been lined up as its new chairman and Li Xin, chief supervisor of China Orient Asset Management Co Ltd, would be named president of Huarong, it said.

Investors sold down the stock sharply when trading resumed on Friday after being halted earlier this week. The Hong Kong-listed shares fell 11 percent, their biggest one-day drop, to hit their lowest level since January last year in a slightly softer wider market .HSI.

“People are holding back on companies haunted by similar issues involving management, worried that they might face some other hurdles even after a management reshuffle,” said Steven Leung, a sales director at UOB Kay Hian. He added that the new chairman’s regulatory background was viewed as a long-term positive.

Huarong hit the headlines this year after building up a 36 percent stake in a key unit of embattled private energy company CEFC China Energy which is acquiring a $9.1 billion stake in Russia's oil major Rosneft ROSN.MM.

The investigation into Lai makes him the latest in a long line of top Chinese executives coming under fire as China looks to rein in risks in the financial sector, targeting riskier lending practices and high levels of corporate debt.

Huarong Investment Stock Corp Ltd 2277.HK and Huarong International Financial Holdings Ltd 0993.HK - which also earlier suspended trading of their shares - both dropped over 10 percent in late trade on Friday.