A fundamental understanding of the interaction of ligands with biological receptors is important because many drugs exert their influence via receptors. Using a cluster approach, we have studied the role of structural and electronic parameters on receptor ligand binding by carrying out density functional theory based calculations. As model systems, we have studied substituted arylguanidines, which activate 5-HT3 receptors in a manner similar to that of serotonin. The geometries of the arylguanidine derivatives were fully optimized to obtain the lowest energy structures. Electronic properties such as binding energies, dipole moments, polarizabilities, and electron affinities, as well as geometric properties, such as molecular volume and dihedral angles were calculated, and their relationship with binding affinity was evaluated. Results obtained were compared to experimental ligand receptor binding affinity data available. These fundamental studies show that though both electronic and geometric properties of the ligands are important for binding, the electron affinities of the substituent species play a dominant role. Potential new fundamental indices for ligand receptor affinity are also discussed.