Abstract
The aim of the article is to examine the relationship between the level of discretionary accruals and corporate investment decisions by using the data of listed production firms from six Gulf Cooperation Council (GCC) countries for the period 2009-2015. We firstly generated discretionary accruals using performance adjusted model introduced by Kothari, et al. (2005). Secondly, we constructed six models to see the relationship between discretionary accruals and investment decisions. To control for country and time effects, we added GDP growth rates of countries as a macroeconomic indicator in all models. Our findings reveal a weak emphasis of discretionary accruals on two dependent variables. Mean accruals are negative for all years and for all countries, and it shows that companies tend to engage in earnings management practices in order to understate income. The use of PPE as an indicator of investment rates for companies provide more precise results than the use of total assets.
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