What is the purpose of valve clearance in a diesel engine? what effect does the valve clearance have on the engine if it too tight or too loose?

Valve clearance are Important for the correct running of your engine. If the valve clearances are too big they will be noisy (click or tapping) and will not open the valves fully. This will restrict the flow of air in, and the flow of exhaust gases out. If they are too small, the valves could be held open slightly when they are supposed to be closed which will lead to loss of compression and possibly burnt valve seats.