Abstract:This study examines the behavioural biases of Japanese institutional investors and discusses implications for their role in corporate governance, based on the findings of a questionnaire survey of fund managers carried out in 2003. Statistical analysis of the survey results reveals a short-term bias in fund managers' investment time horizons, herding, and self-marketing to improve the appearance of portfolio performance under the pressure either of customers or of institutional restraints. We conclude that institutional investors' behaviour contradicts their role as shareholders.