If you’re interested in a career in finance, corporate finance and investment banking are excellent options. They’re both ways that businesses can acquire financing and grow, just through different processes.
Here’s everything you need to know when comparing corporate finance vs. investment banking, including what they are, some differences and similarities, and how you can break into either profession.
What Is Corporate Finance?
Corporate finance aims to ensure long-term financial success for an organization. Their primary goal is to increase the financial value of the business and maximize shareholder gains.
The scope of corporate finance involves:
- Growing business operations
- Investigating new products
- Optimizing capital structure
- Optimizing capital budget
- Increasing revenue
The objectives of corporate finance are the following:
- Maximize the business’ long-term financial health
- Increase shareholder value
- Expand business operations to support growth
How much corporate finance assistance a business receives depends on its size, goals, and debt levels.
What Is Investment Banking?
Investment banking involves raising capital for other companies. Investment banks do this by underwriting new securities in debt and equity markets. These banks also play a major role in complicated and large financial transactions, such as mergers, acquisitions, reorganizations, and IPOs.
The scope of investment banking involves:
- Brokering mergers, acquisitions, and reorganizations
- Managing initial public offerings
- Working with corporations and governments
- Underwriting new equity and debt securities
The objectives of investment banking are the following:
- Structure successful financial transactions, including mergers, acquisitions, and IPOs
- Broker successful trades for private investors and institutions
- Appropriately identify risks with large-scale financial transactions beforehand
- Tailor recommendations to the current economic climate
Overall, investment banks serve as experts on the investment atmosphere and can guide companies in making significant organizational changes.
Corporate Finance vs. Investment Banking: Comparison
Let’s compare corporate finance vs. investment banking more closely.
Some key similarities between corporate finance vs. investment banking are:
- Large-scale financial management
- Maximizing returns on investments, though the investments are different
- Large amounts of capital and assets required
- To work in either field, professional degrees and experience are required
Here are some differences between the two fields.
Corporate finance manages an organization, helping it expand, acquire funding, and increase business value.
Investment banking uses securities to raise capital and assists in large and complicated financial transactions, such as mergers, acquisitions, and IPOs.
Thus, investment banking’s focus is more niche; corporate finance helps with overall financial success.
Investment banking tends to be more competitive and has a more narrow scope of work. Your focus will involve helping organizations navigate mergers, acquisitions, and IPOs; you’ll also underwrite new debts and securities.
Conversely, corporate finance is broader. You’ll help business maximize their financial value through various activities including business expansion, researching new products, securing business lines of credit, and more.
If you prefer more variety in your day, corporate finance may be for you. If, instead, you want to specialize, investment banking could be the better choice.
When evaluating corporate finance vs. investment banking, you want to consider the documents they both prepare.
Corporate finance prepares financial reports, including balance sheets and P&L reports. Investment banking prepares memorandums, pitch books, or other documents that help with relevant financial transactions.
Pursuing a Career in Corporate Finance
Here’s what you need to know to pursue a career in corporate finance.
Those interested in corporate finance should have accounting experience and degrees in finance, business, or economics.
The most competitive candidates have MBAs or master’s degrees in business, analytics, finance, or management.
While in school, get as much relevant work experience as you can. Internships at large banks doing corporate finance work will be useful. Use this time to make connections and create employment opportunities after graduation.
If you’re interested in corporate finance, the following skills will be useful:
- Budgeting and forecasting
- Analytical thinking
- Attention to detail
- Risk analysis
- Cash flow management
- Verbal communication and persuasiveness
Salary and Career Outlook
Some corporate finance jobs and their average salaries include:
- Financial analyst: $71,556
- Cost analyst: $83,304
- Corporate accountant: $66,515
- Treasurer: $80,428
- Chief financial officer: $133,898
The career outlook for corporate finance is positive, with The US Bureau of Labor Statistics estimating a projected growth rate of 7% from 2021 to 2031.
Pursuing a Career in Investment Banking
Here’s what you need to know to pursue a career in investment banking.
Bachelor’s degrees are the minimum. Focus on a degree in accounting, business administration, or finance. Try to go to a school in a city with a strong financial presence, such as New York or San Francisco, to meet interesting people.
Investment banking is a highly competitive field where higher education is becoming an expectation. To maximize your odds of success, consider an MBA or other master’s degree.
To stand out in this competitive field, internship experience at investment banking firms is crucial. Take that time to get hands-on experience and make connections to set you up for future employment.
The following skills will help you on your journey into investment banking:
- Attention to detail
- Strong knowledge of math and economics
- Verbal communication
- Understanding of ethics and compliance
Salary and Career Outlook
Here are compensation numbers for different seniorities in investment banking:
- Analyst: $150-200k
- Associate: $250-450k
- Vice President: $500-700k
- Senior Vice President/Director: $600-800k
- Managing Director: $700k – $1.5 million +
Let’s go back to comparing corporate finance vs. investment banking for a moment: the salaries for investment banking tend to be higher, but it’s also a more demanding field with less work-life balance. Expect to work 12 or more hours per day, often working on weekends.
In corporate finance, the environment is less competitive and you don’t work as many hours, but the salary growth is less.
The career outlook for investment banking is promising, with The US Bureau of Labor Statistics projecting a 10% growth rate from 2021 – 2031 for securities, commodities, and financial service sales agents – this encompasses investment banking.
The Importance of an Executive Recruiter
Given the highly competitive nature of both fields and the importance of connections, getting to know an executive recruiter at the start of your career will pay dividends. They’ll get to know your aspirations and help you climb the corporate ladder when the time comes.
Jennings Executive has over two decades of combined experience matching companies with corporate finance and investment banking talent. Contact us today so we can help you build the career of your dreams.
We hope this article helped you compare corporate finance vs. investment banking and decide which one is right for you.