ABSTRACT: Personnel costs often constitute the major operational cost factor in most companies, and thus they need to be closely monitored and managed to maximize profitability. Their control is critical to ensuring the most effective and efficient use of finite resources. Despite heavy investment in human resources costs, some listed companies still face declining financial performance.The study established the effect of personnel costs on the financial performance of fifty-seven listed companies in Kenya. The study employed a resource-based view theory. The study adopted a longitudinal research design. Secondary panel data was collected from the published audited financial statements from 2017 to 2021. The study employed a random effect Generalized Least Square regression analysis technique with the aid of STATA to analyse data. Both descriptive and inferential statistics were obtained. Study findings indicated that personnel costs had a significant positive effect on financial performance with a p-value of 0.00<0.05 and a coefficient of 0.45. The study recommended that listed companies should carefully evaluate the costs incurred in paying staff salaries and wages. The findings will provide valuable information to accounting standard-setting bodies for reviewing current accounting procedures relating to human resource costs and provide standards for valuation, capitalizing, and reporting such expenditures in the statement of financial position.

KEYWORDS –Financial performance, Human resource accounting, Human resource cost, Listed Companies, and Personnel costs.