Equity Research vs. Investment Banking: What Is the Difference?

 Equity research and investment banking consist of some similar concepts and methods. Both fields involve analyzing companies and their financial performance to generate relevant reports. However, the job titles, skill requirements, and client base differentiate them. This post will explore the difference between equity research and investment banking.


 

Equity Research vs. Investment Banking 


1 | What Is Equity Research? 


You will find a vast literature discussing equity research firms across all the financial publications. After all, stock analysts examine public companies and determine their investment value using equity research services. 

An analyst typically writes a report analyzing the company's financials, industry trends, and management team to make recommendations on buying or selling shares. Additionally, they perform other tasks like hosting conference calls with senior management. 


1.1 | Types of Equity Research Services 


You can use two techniques when employing equity research firms. i.e., fundamental analysis (by fundamentalists) and technical analysis (by technicians). These terms describe how an analyst approaches work. 

Fundamentalists focus on factors such as revenue growth, and meanwhile, technicians focus more on how prices move over time using charts. Ultimately, both roles are valuable for equity research firms to develop practical suggestions and algorithmic trading advice for their clients. 


2 | What Is Investment Banking? 


Investment banks are financial entities that help corporations raise capital, advising them on mergers and acquisitions (M&A), and assisting them with initial public offerings (IPO). Investment banking services also advise companies on corporate restructuring and other strategic transactions. 

The investment banking (IB) industry consists of investment banks and financial analysis providers, serving several domestic and foreign corporations. Besides, the scale of transactions is significantly large, like their clients’ net worth. Therefore, risk dynamics are more complicated for an investment banking services business. 


2.1 | Types of Investment Banking Services 

Investment banking involves a range of institutional services, including financial devices like bond issues or private firms’ share sales, known as going-private transactions. Essentially, they take over the company’s ownership from its existing shareholders by acquiring those shares directly at a premium price. 


Moreover, investment banking services assist businesses in underwriting new issues of debt securities like bonds or loan stock. IB firms also manage the activities necessary in the market making via trading stocks listed on exchanges for their institutional clients’ portfolios. 

3 | Difference Between Equity Research and Investment Banking 

You have learned the nature of equity research firms and how investment banking services help institutional investors. So, you can compare them to highlight the areas where discussing equity research vs. investment banking gets interesting. 


3.1 | Scope 


Equity research firms conduct financial performance analytics on public companies to recommend buy/sell calls. However, Investment banking services serve large investors to manage mergers, debt, and stocks. 


3.2 | Clients 


Equity research services assist all investors interested in trading and portfolio development. Also, the capital amount involved does not need to be astronomical. 

Simultaneously, investment banking services support institutional clients with exceptionally high-value transactions. i.e., government bodies, international enterprises, and significant fund management organizations employ IB solutions. 


3.4 | Deliverables 


Equity research firms must devise investment models and find selection strategies (buy/sell) to identify trading opportunities that allow their clients to manage portfolio risk. 

Investment banking services support their clients through successful business mergers, rival acquisitions, secured loans, pitchbooks, and stocks. 


Conclusion 


Equity research services allow clients to gain extensive data on publicly traded institutions to generate investment advisory reports. However, investment banking services serve high-net-worth institutional clients to manage copious amounts, company ownership, and corporate debt. 

This article focused on the discussion comparing equity research vs. investment banking. Therefore, you have understood how both services are not identical and when to use them. 


Corporate finance is challenging for all businesses, irrespective of their scale. So, you require high-quality research and reliable insights into the portfolios to navigate the markets, taking calculated risks. 

A leader in the equity research services domain, SG Analytics helps organizations and investors understand their financial performance with remarkable investment guidance. Contact us today if you seek data-driven insights to strengthen your company’s fundamentals and institutional portfolios. 

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