In Mexico, Enrique Pena Nieto, the favorite candidate to succeed conservative President Felipe Calderon, joined some opposition lawmakers in calling for the government to launch an investigation. Mexico's attorney general Marisela Morales said her office would act promptly if asked to do so by the Ministry of Finance or Ministry of the Economy.

"If licenses were given out where they shouldn't have been, there's fraud not only in the cities where that happened, but also there could have been fiscal fraud," Francisco Javier Castellon of the Party of the Democratic Revolution (PRD) was quoted as saying in the newspaper Rumbo de Mexico.

Bribery and corruption are pervasive in Mexico, where the justice system is weak and lower-level public sector workers earn relatively low salaries. A study last year by Transparency International showed that Mexican companies were perceived to be the third-most likely behind those in China and Russia to pay bribes abroad.

Still, the country has been taking steps to turn around this image and an anti-corruption law was recently passed by Mexico's lower house that would give the country new powers to fine companies for corruption.

BMO Capital Markets analyst Wayne Hood said in a research note that Wal-Mart's growth could be hurt both domestically and abroad by the bribery allegations. "Articles like this will be used against the company by activists and competitors when it attempts to open stores in the U.S. and abroad," Hood wrote in a note on Monday.

Others said the share drop could actually provide a buying opportunity, given that Wal-Mart shares had been trading near a 52-week high on optimism over the recovery in its U.S. business. Options market activity also suggested a bullish bias on Wal-Mart stock.

Citigroup analysts said in a note that, after discussions with Wal-Mart, it believed that the retailer would conduct a"thorough and transparent" review and said any pressure on the stock was "an enhanced buying opportunity."

The California State Teachers' Retirement System (CalSTRS), which holds over 5.5 million shares of Wal-Mart Stores, will keep its exposure to the retail giant until it finds out what happened, CalSTRS's director of corporate governance, Anne Sheehan, told Reuters.

WALMEX RESULTS DISAPPOINT

Some hedge fund managers said Walmex was the more attractive target for short sellers.

Walmex said on Monday that it does not believe the allegations will hurt its business.

After the market close, Walmex's first-quarter earnings missed analysts' expectations. Executives on a pre-recorded call did not mention the bribery probe.

"This investigation shocked investors," said Gerardo Roman, head of trading at Mexico City brokerage Actinver. "Walmex had been considered an extremely ethical company. It was a safe haven for investors," he added, noting that the stock reached historic highs two weeks ago.

Lawyers said Wal-Mart could face shareholder lawsuits accusing the company of securities fraud for having inflated its stock price by misleading investors about its FCPA compliance. Cosmetics maker Avon Products Inc faces similar lawsuits over its activities in China.

Wal-Mart executives and directors, like their Avon counterparts, could face "derivative" lawsuits accusing them of covering up or turning a blind eye to the alleged bribes.

These lawsuits seek to force executives, or their insurers, to pay money directly to Wal-Mart for breaching or ignoring their duties, and for the company to tighten internal controls.

Shareholders could also use the power of the ballot box. At Wal-Mart's June 1 annual meeting, they could vote out directors they deem responsible for allowing