Shifting the power to set IPO prices from regulators to market participants in China leads to less depressed offer prices relative to earnings. Companies are less likely to choose low-quality auditors or inflate earnings before going public when market participants set prices. However, there is no evidence that IPOs are more likely to be overpriced in this scenario. The financial reporting decisions made during the IPO have a lasting impact on a company's future financial reporting quality. This research sheds light on the roles of regulators and market forces in protecting investors in countries with weak institutional environments.