Market or corporate finance ?
Finance, as a professional field, is traditionally divided into two parts : corporate finance and market finance. But many students struggle to find the field of finance that best suits them, often due to a lack of information. We will try to clarify this.
First, let's clarify what these terms mean.
What is market and corporate finance ?
Market finance is the field that studies financial markets in general. More precisely, market finance is about determining the price of financial assets (shares, bonds, swaps, options, derivatives,...) but also about how investors build up their asset portfolio. In short, market finance stands between financial markets, financial institutions, and financial instruments.
Corporate finance is the field of finance that deals with the financial decisions of companies. Its main activity is the analysis and "maximisation of the value of the firm for its shareholders considered over a long period" according to James C. Van Horne, an American economist.
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What is the difference between market finance and corporate finance?
Secondly, what differentiates these two fields is above all the way of life and work. Corporate finance is about serving a customer. To take an example, when a bank or a boutique obtains a mandate in the context of an M&A operation, market hours (9am-5.30pm) are of little importance. The challenge here is to be close to the client and to respond within a very short timeframe according to his requests. Apart from the execution of the mandate, it can take a long time to find a paid mandate.
In market finance, however, it is accepted that the hours of operation are roughly in line with the opening and closing times of the markets. However, it is important to note that the hours may vary depending on the sector of activity. In corporate finance, an M&A deal can take several months and, similarly, monitoring a PE investment can take years. Similarly, in market finance, a trader will have less time to take advantage of an opportunity than someone working on mathematical models or structured products. In short, the hours depend on the type of activity, whether in market or corporate finance. Therefore, every student who wants to make a career in finance must make a choice between corporate finance and market finance. But also, to know what kind of activity the student wants to go into and what kind of profession the student wants to pursue : this is an important consideration that requires time and experience.
In terms of work organization, corporate finance often has a clear hierarchy. An M&A analyst will not be able to take advantage of a client appointment straight away. Therefore, the address book in corporate finance grows over time. For example, in M&A, an analyst changes rank every 3 years to become an Associate, Vice-President and finally Director. Concerning market finance, the hierarchy is less concrete. With many specialists aiming to make money for their organization, students who want to experience change will probably be less attracted.
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Market or corporate finance : which field is better paid ?
Finally, we can address an interesting topic : remuneration. Whether in market or corporate finance, remuneration depends on many parameters (structure, position, grade, school, location, profession, sector of activity, etc.). While the fixed salary is generally more important in corporate finance, the variable salary (bonuses, etc.) is more remunerative in market finance. Thus, it is not really revealing to talk about remuneration in market or corporate finance. But rather to find out about the job you want to do and look at the remuneration that goes with it.
Make your choice !
