Based on a whistle-blower tip, Nissan has been doing an internal investigation over the past several months into suspected financial misconduct involving Ghosn and director Greg Kelly, the company said.
Chairman Carlos Ghosn was arrested on November 19 by Tokyo prosecutors on suspicion of under-reporting his income in violation of the Financial Instruments and Exchange Act, according to people close to the investigation.
The Japanese broadcaster NHK said Ghosn was arrested Monday after he voluntarily submitted to questioning by Tokyo prosecutors.
Karen Brenner, clinical professor of business at New York University Stern School of Business, says the Ghosn situation shows that "boards have to be really alert, especially in good times".
The Renault-Nissan-Mitsubishi alliance sold 10.61 million passenger cars and light commercial vehicles, making it the number-one automotive group worldwide. Ghosn, 64, also allegedly engaged in personal use of company assets, it said.
In 2016, Ghosn also took charge at troubled Mitsubishi after Nissan threw it a lifeline, buying a one-third stake for about $2.2 billion as it wrestled with a mileage-cheating scandal that hammered sales.
"Since the investments these companies have to make in electric cars and autonomous driving are so big, and since the auto industry is changing in ways we don't fully understand, it's probably suicidal to break up the alliance", said Kenneth Courtis, chairman of Starfort Investment Holdings, an investment, private equity and commodity group, and a former Asia vice chairman of Goldman Sachs Group Inc.
Shares in Renault nosedived by 15 percent in early trade deals, marking their lowest level since December 2014. He joined Nissan in 1999 after the 1996 acquisition of major stake by Renault.
Neither Mr Ghosn or Mr Kelly have made any public comment on the reports.
Ghosn began his career at Michelin in France, moving on to Renault. He became a star in the business world in Japan, even spawning a manga comic book on his life, although he also attracted criticism for his high salary.
Ghosn served as Nissan's chief executive from 2001 until April 2017, becoming chief executive of Renault in 2005, leading the two major automakers simultaneously.
Seiji Sugiura, a senior analyst at Tokai Tokyo Research Institute, said the path forward remains unclear, as Ghosn may deny the allegations.
With the arrest, Mr Ghosn's role as chief executive of the Renault-Nissan-Mitsubishi Alliance hangs in the balance.
The chairman of Nissan, Mitsubishi Motors and Renault has been arrested over claims of financial misconduct, sending shockwaves throughout the auto industry.
Renault board's lead independent director issued a statement Monday saying only that the board would meet soon and that he and two other independent directors wished to express their "dedication to the defense of Renault's interest in the alliance".