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The latest release of Google Chrome browser (v.55) had introduced changes that affect the RadPanelBarItems highlight effect when they are hovered. The issue could be overcome by changing the RenderMode of the PanelBar to Lightweight.
For more information on the Lightweight rendermode, refer to the following documentation article:
http://docs.telerik.com/devtools/aspnet-ajax/controls/panelbar/radpanelbar-items/render-modes