Nissan's chief executive officer, Hiroto Saikawa, confirmed that Ghosn was arrested on Monday. In addition to this, he received €9.2 million in his final year as Nissan chief executive.
Ghosn's removal would deprive the manufacturer of a seasoned leader, and follow a number of surprise shakeups in the sector that have brought new CEOs to Volkswagen AG, VW's Audi brand, Daimler AG and Fiat Chrysler Automobiles. Ghosn said in September that the companies will "clarify everything" within the first half of his current Renault CEO term.
Shares in French carmaker Renault plunged as much as 12 percent as the news of his alleged misconduct broke - Renault's lowest level in about four years.
"You're going to see clusters of carmakers, of tech companies, software companies, align together in order to bring this offer to the market", the executive said in an interview last month.
Ghosn was one of the highest paid executives in Japan.
He said as recently as last month that he planned to stay on until 2020, although he stepped down from the top job at Nissan a year ago, amid reports that the companies plan to change the alliance's structure, possibly through a merger.
Chairman Carlos Ghosn is suspected of having used multiple residences purchased by the automaker in the Netherlands and three other countries for free as part of his alleged financial misconduct, sources with knowledge of the situation said Tuesday.
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Although not shedding enough light on the subject - more will probably surface in the hours ahead - Nissan "deeply apologizes for causing great concern to our shareholders and stakeholders".
"We need to really look back at what happened, take it seriously and take fundamental countermeasures", he said.
Ghosn has also been a nemesis for French unions and left-wing politicians, who saw him as a symbol of globalized, US -driven capitalism and its excesses - and notably its executive pay packages.
It's a shocking development, which threatens the whole future of the Nissan-Renault-Mitsubishi alliance created and led by Ghosn over many years. As well running Renault and Nissan, he is chairman of Mitsubishi Motors (MMTOF).
The arrest is an astonishing reversal of fortune for Ghosn, often feted for his success at turning around failing companies with hard-nosed tactics that earned him the nickname "Le Cost Killer" in France.
"I have to say that this is a dark side of the Ghosn era which lasted for a long time".
Brazilian-born, of Lebanese descent and a French citizen, Mr Ghosn began his career at Michelin in France, moving on to Renault.
Still, Saikawa also praised Ghosn's leadership, noting that it had made Nissan stronger. He joined Nissan in 1999 after Renault bought a controlling stake and became its CEO in 2001.
Ghosn stepped down as CEO of Nissan in 2017.