You are required to critically evaluate two statements listed below, in which corporate managers discuss the effect of market efficiency on firms and you need to specify which one of the statements you agree or disagree with.

1. Shareholders will never know our capital budgeting decisions.

2. We cannot fool shareholders and the market. The market and shareholders will punish the company if bad capital budgeting decisions are made.

(Hint: you can discuss the implications of market efficiency for corporate managers.)