Research on the effect of financial analysts on firm misconduct behavior has shown that analysts can either put pressure on managers to meet goals at all costs, encouraging misconduct, or can have an external monitoring effect to reduce misconduct. However, the literature is relatively silent about the conditions when analysts exert a pressure role versus a monitoring one. We address this gap by theorizing that financial analysts have an inverted U-shaped effect on manager’s propensity to engage in misconduct behavior. We argue that the pressure effect to cut corners exists at low levels of analyst coverage while the monitoring effect helps reduce misconduct at high levels of analyst coverage. Further, these effects are moderated by dispersion in analysts’ forecasts and corporate governance effectiveness due to the differential influence of each moderator on the underlying pressure and monitoring mechanisms. Using an instrumental variable approach on a multi-industry sample, we find support for our hypotheses.