Investment Banking vs. Corporate Finance: An Overview

Corporate finance and investment banking aren't all that different in a general sense. Investment banks raise capital for other companies through securities operations in the debt and equity markets. Investment bankers also help coordinate and execute mergers and acquisitions (M&A). They offer advisory services to big clients and perform complex financial analyses.

Investment Banking

A generally accepted distinction between corporate finance jobs and investment banking jobs is that a corporate finance professional deals with day-to-day financial operations and handles short- and long-term business goals, while an investment banker focuses on raising capital. She might run private placements and conduct M&A deals. Investment banking grows a company,

Corporate Finance

Corporate finance manages a company. It's a catch-all title for any business division that handles financial activities for a firm. It can be a bit tricky to differentiate it from investment banking because, depending on the context, investment banking might count as a type of corporate finance. Likewise, an investment banking firm might have a corporate finance division.

Investment Banking vs. Corporate Finance Example

It's challenging, if not impossible, to nail down an accurate salary for the average corporate finance position. Too many different jobs are available, and many of them overlap.

A financial analyst, technically involved in investment banking, could expect a median salary of $84,300 in 2017, according to the Bureau of Labor Statistics (BLS). Half earned more and half earned less than $84,300. Meanwhile, a chief financial officer and other top professionals in the corporate finance field enjoyed a median salary of $104,700 in the same year, according to the BLS.

Even junior investment banking analysts can expect compensation of $70,000 to $150,000 a year when signing bonuses and performance-based bonuses are factored in, according to data from Wall Street Oasis

The BLS expects financial analyst positions to grow at a rate of 11 percent between 2016 and 2026, faster than the 8 percent outlook for corporate finance executives.

Key Differences

Many choose to walk away from investment banking careers after a few years due to burnout. Investment banking deals tend to be executed by small teams—three to seven is standard—with one analyst, one or two associates, one vice president, and a lead managing director. Workflow is bottom-up, and those lowest on the rungs are responsible for an exceptional amount of effort. Tales abound of investment analysts and associates working 80- to 100-hour weeks. An 80-hour week works out to five 16-hour days or seven 11.5-hour days.

Those debating a career in investment banking versus a career in corporate finance have two overriding considerations: workload and salary. The prestige and compensation of investment banking jobs are alluring to many, so intense working hours are a small hurdle to clear.

Corporate finance jobs aren't easy to get, but they're more plentiful and less competitive than investment banking jobs. Corporate finance still offers an excellent career in business analytics and corporate culture to those who value their weekends, holidays, and evenings.

Special Considerations

Many different viable career paths can be found in corporate finance because there are so many different kinds of jobs in the field. Individuals can find their niches as accountants, advisors, account managers, analysts, treasurers, business analysts, or any number of other jobs. There are a few necessary skills, such as an understanding of corporate finance and effective communication skills.

Investment banking is considered one of the premier fields in the financial industry. There are two standard paths into an investment banking career: attend a noted undergraduate university and enter on the ground level as an analyst, or go to business school, earn a Master of Business Administration (MBA), and break through as an associate. Interested investment bankers should focus on degrees in finance, economics, banking, or investment analysis. Most intern or take low-level positions at large banks to gain experience, and many work as analysts before receiving their MBA.

Major investment banks, especially in New York and London, focus their recruiting efforts on the best-performing prospects from Ivy League schools—although it's not unheard of for exceptionally analytical prospects with degrees in challenging subjects such as biopharmaceuticals or other medical fields to make their way into the industry.

Key Takeaways

  • Investment banking grows a company, while corporate finance manages a company.
  • A corporate finance professional deals with day-to-day financial operations and handles short- and long-term business goals, while an investment banker focuses on raising capital.
  • The academic and experience credentials necessary to become an investment banker are higher than for most corporate finance positions.