The issue around capital constraints in co-operatives has attracted public attention in Canada and elsewhere. In this dissertation, the effect of the degree of financial leveraging on the performance of co-operative organizations is assessed using a combination of case study, cross-sectional and longitudinal survey techniques. Using rigorous econometric methods this study addresses the following questions: (i) What are the impacts of excessive debt on agribusiness co-operative performance? (ii) Are both supply and marketing co-operatives equally affected by the issues around capital constraints? (iii) What is the impact of differences in risk attitude between managers and directors on the financial leverage of co-operatives and members welfare? and (iv) What is the impact of excessive debt on the efficiency of agribusiness co-operatives organizations?In the first paper, the impact of agency costs of debt on variable costs of production is explored using variable cost functions. The results indicate that the existence of agency costs of debt may be contingent on the structure of the co-operative and the industry regulatory environment. The results in the second paper suggest that as compared to managers, directors tend to have more favourable attitudes towards a higher debt-to-equity ratio. The results from the illustrative simulation indicate that the more averse decision makers are to risk, the lower the empirically determined values of members welfare. Furthermore, the simulation results illustrated that the impacts of differences in risk attitudes may depend on the influence of decision makers.In the third paper, the results from a random parameters stochastic frontier model indicate that costs could have been reduced by more than 15 per cent had the firms been on their cost frontier. Further analysis shows that leveraging has a negative influence on efficiency of firms in all industries investigated, except for firms in the feed mill industry. The empirical results in this study suggest that obtaining more equity capital might be a necessary condition for overcoming the capital constraint problems in agricultural co-operatives. Thus, an incentive mechanism that may stimulate co-operative members and community involvement to strengthen the equity capital base needed to compete in the market place is necessary.