TOKYO (Reuters) - Most Japanese firms believe the Tokyo bourse should be cautious in its approach to any delisting of embattled Toshiba Corp 6502.T, concerned about the potential impact on its clients, subcontractors and financial markets, a Reuters poll showed.

FILE PHOTO: A logo of Toshiba Corp is seen outside an electronics retail store in Tokyo, Japan, February 14, 2017. REUTERS/Toru Hanai/File Photo

The conglomerate, whose products range from TVs to semiconductors to nuclear reactors, has already breached several regulatory rules that have put it at grave risk of a delisting.

But the Tokyo Stock Exchange has so far shown little sign of taking an immediate hard-line stance against Toshiba as the company and the authorities grapple with the fallout from huge cost overruns at now bankrupt U.S. nuclear unit Westinghouse.

The results of the Reuters Corporate Survey, conducted May 9-19, suggest strong support in the business community for a go-slow approach in tackling the thorny question of whether to delist, and if so when and how to proceed.

While 37 percent of firms were in favor of a delisting, 58 percent said they wanted the issue to be dealt with cautiously, and another 5 percent said it should remain listed.

“The impact of a delisting - not only on Toshiba, which itself is a gigantic company, but also on the companies around it - needs to be considered,” wrote a manager at metal products firm.

Toshiba has been on the Tokyo bourse’s supervision list since mid-March after failing to clear up concerns about its internal controls after a 2015 accounting scandal.

Although Toshiba submitted a report on its internal controls to the exchange at the time, it has since reported earnings reports late and without endorsement from its auditor.

If the bourse finds Toshiba’s efforts to improve its internal controls wanting, then it can move to delist the conglomerate. There are, however, no set rules governing how long the bourse should take to come to a conclusion.

A spokeswoman for the exchange said its examination of Toshiba’s internal management system is still ongoing and declined to comment on the results of the survey. Toshiba also declined to comment.

Nicholas Benes, head of The Board Director Training Institute of Japan, who reviewed the survey results, said that hasty moves towards a delisting would do more harm than good in restoring market confidence.

“The most important thing is that the TSE rules support governance so that companies self-cleanse and don’t have to be delisted,” he said.

Toshiba would, however, have to face an automatic delisting if it does not manage to claw its way out of negative net worth - where liabilities exceed assets - by the end of this financial year in March.

With 540 billion yen ($4.8 billion) of negative shareholder equity, its ability to do so hinges on the sale of its semiconductor unit, the world’s second-biggest producer of NAND memory chips.

The survey found that the vast majority of firms, 87 percent, support the government’s pledge to block any sale that would risk highly prized chip technology leaving the country.

The government's stance is likely to favor Western suitors such as KKR & Co LP KKR.N, which is expected to join hands with a state-backed fund, the Innovation Network Corp of Japan and make it difficult for bidders such as Taiwan's Foxconn2317.TW, which has deep ties to China, to win.

Other suitors for the unit, valued by Toshiba at at least $18 billion, include U.S. chip maker Broadcom Ltd AVGO.O, which has teamed up with private equity firm Silver Lake, Bain Capital which has partnered with South Korean chipmaker SK Hynix 000660.KS as well as Toshiba business partner Western Digital Corp WDC.O.

The survey, conducted monthly for Reuters by Nikkei Research, polled 527 big and mid-sized businesses. Around 220 firms, which reply on condition of anonymity, answered the questions on Toshiba.

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